Manufacturer encroachment with consumer digital privacy in dual-channel supply chains

Abstract

Utilizing a game-theoretic model, this study distinguishes between privacy-protecting and privacy-disclosing consumers, examining the impact of digital privacy on manufacturers’ channel strategies, including no encroachment, encroachment, and shifting. The results indicate that when consumers prefer privacy disclosure, manufacturers consistently opt for the shifting strategy. In contrast, when privacy protection is prioritized, the outcome depends on the intensity of consumer preferences. Specifically, weak preferences lead to encroachment, whereas strong preferences favor no-encroachment. This contingency framework illustrates how privacy preference thresholds shape channel strategy selection. From a practical perspective, the findings offer actionable guidance for manufacturers. First, a win-win outcome depends on the manufacturer’s cost-efficiency in channel-shifting operations, suggesting that firms should assess their operational capabilities before implementation. Second, consumer benefits under encroachment imply manufacturers can adopt this strategy for competitive advantage while addressing privacy concerns. These insights equip practitioners with a decision-making toolkit for balancing privacy compliance, channel efficiency, and stakeholder value creation in digital transformation initiatives.