Abstract:

In the era of digital economy， with the application of big data and artificial intelligence technology， data has become an important strategic element for firms to compete. On the one hand， firms can provide consumers with targeted recommendations or innovative products； on the other hand， firms implement the “big data discriminatory pricing” to grab consumers’surplus. With this in mind， the controversy between data utilization and data protection becomes more and more extensive， which also leads to differentiated privacy protection policy， namely no protection policy， voluntary protection policy and mandatory protection policy.The existence of the privacy protection policy brings severe challenges to firms’ pricing decisions and data usage decisions. If the mandatory protection policy is implemented， the data application behavior of firms is strictly forbidden， and firms have to conduct unified pricing. If the voluntary protection policy is implemented， consumers can choose whether to disclose personal data to firms. If the no protection policy is implemented， the high ability enterprise can conduct the first-degree price discrimination.The price competition of firms is analyzed with different data usage capabilities based on the horizontal differentiated duopoly model， to solve the pricing equilibrium and social welfare under the different protection policy， and to clarify the implementation conditions of the different levels of protection policy. The main conclusions are as follows： （1） The consumer surplus maximization and producer surplus maximization can’t be achieved simultaneously， and the second-best can be achieved under no protection policy and mandatory protection policy. （2） When the data usage advantage is low， the consumer surplus is maximized under the voluntary protection policy， otherwise， the producer surplus is maximized. （3） Different from the previous studies which claim that price discrimination worsens the profits of firms， enterprise can enlarge the market scale through data utilization.The important theoretical innovation of this paper is to provide an insightful framework， find some reasonable results which are new to the existing literature， and supplement the relevant literature in the fields of data protection and data utilization. The data protection is necessary， but not absolute. The implement of data protection policy needs to rely on the data utilization ability of different industries and consumers privacy concerns.

Key words: privacy concerns, first-degree price discrimination, privacy data protection, the horizontal differentiated duopoly model