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Customer Information Sharing: Strategic Incentives and New Implications

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  • Byung‐Cheol Kim
  • Jay Pil Choi

Abstract

We study oligopolistic firms' incentives to share customer information about past purchase history when firms are uncertain about whether a particular consumer considers the product offerings as complements or substitutes. We show that both the incentive to share customer information and its effects on consumers depend crucially on the relative magnitudes of the prices that would prevail in the complementary and substitute markets if consumers were fully segmented according to their preferences. This paper has important implications for merger analysis when the primary motive for merger is the acquisition of another firm's customer lists. Our analysis also suggests a new role of middlemen as information aggregators.

Suggested Citation

  • Byung‐Cheol Kim & Jay Pil Choi, 2010. "Customer Information Sharing: Strategic Incentives and New Implications," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 19(2), pages 403-433, June.
    • Handle: RePEc:bla:jemstr:v:19:y:2010:i:2:p:403-433
    DOI: 10.1111/j.1530-9134.2010.00256.x
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    Citations

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    Cited by:

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    2. Bernard Caillaud & Romain de Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," Working Papers halshs-00622291, HAL.
    3. Choe, Chongwoo & Matsushima, Noriaki & Tremblay, Mark J., 2022. "Behavior-based personalized pricing: When firms can share customer information," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    4. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," Working Papers hal-01226250, HAL.
    5. Maran Marimuthu & Haslindar Ibrahim, 2013. "A Case Study of the Local Bank Merger: Is the Acquiring Entity Better Off?," Accounting and Finance Research, Sciedu Press, vol. 2(2), pages 1-22, May.
    6. Chuang, Shu-Hui & Lin, Hong-Nan, 2013. "The roles of infrastructure capability and customer orientation in enhancing customer-information quality in CRM systems: Empirical evidence from Taiwan," International Journal of Information Management, Elsevier, vol. 33(2), pages 271-281.
    7. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," PSE Working Papers hal-01226250, HAL.
    8. Bernard Caillaud & Romain de Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," PSE Working Papers halshs-00622291, HAL.
    9. Chongwoo Choe & Noriaki Matsushima & Mark J. Tremblay, 2020. "Behavior-Based Personalized Pricing: When Firms Can Share Customer Information," ISER Discussion Paper 1083, Institute of Social and Economic Research, Osaka University.
    10. Chongwoo Choe & Jiajia Cong & Chengsi Wang, 2024. "Softening Competition Through Unilateral Sharing of Customer Data," Management Science, INFORMS, vol. 70(1), pages 526-543, January.
    11. Chen, Yongmin & Hua, Xinyu & Maskus, Keith E., 2021. "International protection of consumer data," Journal of International Economics, Elsevier, vol. 132(C).
    12. Shy, Oz & Stenbacka, Rune, 2013. "Investment in customer recognition and information exchange," Information Economics and Policy, Elsevier, vol. 25(2), pages 92-106.
    13. Ronen Gradwohl & Moshe Tennenholtz, 2022. "Pareto-Improving Data-Sharing," Papers 2205.11295, arXiv.org.
    14. Alessandro Acquisti & Curtis Taylor & Liad Wagman, 2016. "The Economics of Privacy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 442-492, June.
    15. Bernard Caillaud & Romain De Nijs, 2014. "Strategic Loyalty Reward in Dynamic Price Discrimination," Marketing Science, INFORMS, vol. 33(5), pages 725-742, September.
    16. De Nijs, Romain, 2017. "Behavior-based price discrimination and customer information sharing," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 319-334.
    17. Flavio Pino, 2022. "The microeconomics of data – a survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 635-665, September.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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