<p>This study examines how digital platforms formulate privacy strategies under the observer effect, which in turn compels developers to adjust their sales approaches, ultimately reshaping market dynamics. Our investigation into how these strategies enhance privacy safeguards and supply chain efficacy yields several key findings. First, we identify a saturation effect in consumer valuation, where initial rapid growth diminishes with increasing external attention and social influence—a distinct departure from traditional linear models. Second, the paper identifies a price convergence mechanism: wholesale prices for high- and low-level developers adjust inversely in response to shifts in market share, ultimately converging to an identical point when demand is split evenly. Furthermore, the observer effect not only elevates wholesale and retail prices across the board but also stimulates investment in privacy protection services and boosts overall supply chain profits. Importantly, platform investments in privacy technology transcend mere cost burdens; they expand market demand by improving consumer privacy perceptions, thereby increasing profits. Moreover, the number of developers significantly influences the platform’s strategic allocation of resources toward low-quality developers and privacy technology. Furthermore, the optimal strategy for maximizing social welfare in digital product markets depends on developer composition and the social valuation of privacy protection. Finally, the extension endogenizes developer composition and strategy, and refines cost-sharing to determine optimal developer numbers and thresholds that balance privacy improvements and supply chain profits.</p>