One important factor that determines the quality of web-based customer service is the ability of a firm's website to provide individual caring and attention. In this sense, online vendors try to offer varieties of web-based personalization. However, many previous studies show that there is an obvious trade off between personalization and customer privacy. The main objective of this research is, therefore, to verify the impact of consumers' information privacy concerns on firms' collection and use of consumer information for web-based personalization where firms compete with different levels of ability in consumer information utilization for personalization. Our result shows that a firm of inferior ability in customer information utilization is more affected by privacy concerns than a firm of superior ability in choosing to collect and use consumer information for personalization. However, this does not mean that a firm of inferior ability, which chooses not to provide personalization due to privacy concerns, is worse off than a firm of superior ability, which chooses to provide personalization, in generating profits. On the contrary, a firm of superior ability can become worse off than a firm with inferior ability. (C) 2009 Elsevier B.V. All rights reserved.