Consumer privacy and distribution contract

Abstract

PurposeIn the Information Age, an increasing number of firms and researchers focus on consumer privacy. Meanwhile, many firms that collect consumer information through, information disclosure, consumer privacy, agency model, distribution contracts products or services often adopt the agency contract or the wholesale contract to sell through the online platform. This study aims to examine how different distribution contracts affect supply chain decisions when the firm can profit from disclosing consumer information.Design/methodology/approachThe authors use Stackelberg model to describe the relationship between consumer privacy and distribution contracts. Solve the model and analyze the monotonicity of the equilibrium results. The optimal contract choice and win-win conditions are obtained by comparing the profits under different contracts.FindingsThe authors find that when consumers’ maximal valuation is low in the market, the firm prefers to profit from disclosing consumer information under both the agency contract and the wholesale contract. As consumers’ maximal valuation increases, the firm turns to profit from product sales. Under the agency contract, the platform only generates profit when the consumers’ maximal valuation is high. By comparing the profits of the platform under the two types of contracts, the authors find the platform’s optimal contract choice under different consumers’ maximal valuations and platform commission rates. Combined with the comparison results of the firm’s profit, the authors provide the win-win conditions under the agency contract and wholesale contract.Originality/valueThis study analyzes the supply chain decision under the agency contract and wholesale contract, and it helps deepen the understanding of the interaction between consumer information disclosure and channel distribution contract.