How Much to Share with Third Parties? User Privacy Concerns and Website Dilemmas1

Publishers websites are increasingly presenting content and services that are not created and managed by the website administrators themselves, but are provided by other third parties. While third party content and services provide value and utility to website users, this comes at the cost of user information being shared with the third party. Privacy concerns surrounding information leakage have been growing rapidly. With increasing concerns regarding online privacy and information disclosure, it is important to understand the factors that affect the level of sharing between publisher websites and third parties. In this study, we propose a two-sided economic model that captures the interaction between the users, publisher websites, and third parties. Specifically, we focus on the effect of privacy concerns on the sharing behavior of the publisher website and the impact of users’ privacy concerns on third party market concentration. We then analyze welfare aspects to provide insights on the impacts of industry regulations and policy on users, publisher websites, and third parties. We partially validate the model using an exploratory empirical analysis of publisher website third party sharing behavior and the structure of the industry. To the best of our knowledge, this study is among the first to analyze publisher website decision making in sharing user information with third parties.