IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v19y2010i2p403-433.html
   My bibliography  Save this article

Customer Information Sharing: Strategic Incentives and New Implications

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1530-9134.2010.00256.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1530-9134.2010.00256.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Malueg, David A. & Tsutsui, Shunichi O., 1996. "Duopoly information exchange: The case of unknown slope," International Journal of Industrial Organization, Elsevier, vol. 14(1), pages 119-136.
    2. Steven Tadelis, 1999. "What's in a Name? Reputation as a Tradeable Asset," American Economic Review, American Economic Association, vol. 89(3), pages 548-563, June.
    3. Banal-Estanol, Albert, 2007. "Information-sharing implications of horizontal mergers," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 31-49, February.
    4. Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
    5. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
    6. Thomas Gehrig & Rune Stenbacka, 2000. "Information Sharing in Banking: A Collusive Device?," Econometric Society World Congress 2000 Contributed Papers 1837, Econometric Society.
    7. Calzolari, Giacomo & Pavan, Alessandro, 2006. "On the optimality of privacy in sequential contracting," Journal of Economic Theory, Elsevier, vol. 130(1), pages 168-204, September.
    8. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
    9. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
    10. Drew Fudenberg & Jean Tirole, 2000. "Customer Poaching and Brand Switching," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 634-657, Winter.
    11. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-429, July.
    12. Jan Bouckaert & Hans Degryse, 2006. "Entry and Strategic Information Display in Credit Markets," Economic Journal, Royal Economic Society, vol. 116(513), pages 702-720, July.
    13. Alessandro Acquisti & Hal R. Varian, 2005. "Conditioning Prices on Purchase History," Marketing Science, INFORMS, vol. 24(3), pages 367-381, May.
    14. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    15. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, vol. 97(3), pages 713-744, June.
    16. Helmut Bester, 1998. "Quality Uncertainty Mitigates Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 828-844, Winter.
    17. Gal-Or, Esther, 1984. "Price Dispersion with Uncertain Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 441-457, June.
    18. Hugo Sonnenschein, 1968. "The Dual of Duopoly Is Complementary Monopoly: or, Two of Cournot's Theories Are One," Journal of Political Economy, University of Chicago Press, vol. 76(2), pages 316-316.
    19. Curtis R. Taylor, 2004. "Consumer Privacy and the Market for Customer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 631-650, Winter.
    20. Taylor, Curtis R, 2003. "Supplier Surfing: Competition and Consumer Behavior in Subscription Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 223-246, Summer.
    21. Greg Shaffer & Z. John Zhang, 2000. "Pay to Switch or Pay to Stay: Preference‐Based Price Discrimination in Markets with Switching Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 397-424, June.
    22. Liu, Qihong & Serfes, Konstantinos, 2006. "Customer information sharing among rival firms," European Economic Review, Elsevier, vol. 50(6), pages 1571-1600, August.
    23. Dov Fried, 1984. "Incentives for Information Production and Disclosure in a Duopolistic Environment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(2), pages 367-381.
    24. Biglaiser, Gary & Friedman, James W., 1994. "Middlemen as guarantors of quality," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 509-531, December.
    25. William Novshek & Hugo Sonnenschein, 1982. "Fulfilled Expectations Cournot Duopoly with Information Acquisition and Release," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 214-218, Spring.
    26. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    27. Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(3), pages 433-446.
    28. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 355-371.
    29. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
    30. Li, Yiting, 1998. "Middlemen and private information," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 131-159, June.
    31. Armantier, Olivier & Richard, Oliver, 2003. "Entry and Exchanges of Cost Information," Journal of Regulatory Economics, Springer, vol. 24(2), pages 223-241, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," PSE Working Papers hal-01226250, HAL.
    2. Chen, Yongmin & Hua, Xinyu & Maskus, Keith E., 2021. "International protection of consumer data," Journal of International Economics, Elsevier, vol. 132(C).
    3. 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.
    4. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," Working Papers hal-01226250, HAL.
    5. 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).
    6. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2022. "Data brokers co-opetition [The impact of big data on firm performance: an empirical investigation]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 820-839.
    7. 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.
    8. Bernard Caillaud & Romain de Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," Working Papers halshs-00622291, HAL.
    9. Ronen Gradwohl & Moshe Tennenholtz, 2022. "Pareto-Improving Data-Sharing," Papers 2205.11295, arXiv.org.
    10. 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.
    11. 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.
    12. Bernard Caillaud & Romain de Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," PSE Working Papers halshs-00622291, HAL.
    13. Bernard Caillaud & Romain De Nijs, 2014. "Strategic Loyalty Reward in Dynamic Price Discrimination," Marketing Science, INFORMS, vol. 33(5), pages 725-742, September.
    14. Shy, Oz & Stenbacka, Rune, 2013. "Investment in customer recognition and information exchange," Information Economics and Policy, Elsevier, vol. 25(2), pages 92-106.
    15. De Nijs, Romain, 2017. "Behavior-based price discrimination and customer information sharing," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 319-334.
    16. 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.
    17. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Piccolo, Salvatore & Pagnozzi, Marco, 2013. "Information sharing between vertical hierarchies," Games and Economic Behavior, Elsevier, vol. 79(C), pages 201-222.
    2. Gehrig, Thomas & Stenbacka, Rune, 2007. "Information sharing and lending market competition with switching costs and poaching," European Economic Review, Elsevier, vol. 51(1), pages 77-99, January.
    3. Vincent Conitzer & Curtis R. Taylor & Liad Wagman, 2012. "Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases," Marketing Science, INFORMS, vol. 31(2), pages 277-292, March.
    4. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.
    5. 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.
    6. Curtis Taylor & Liad Wagman, 2008. "Who Benefits From Online Privacy?," Working Papers 08-26, NET Institute.
    7. António Brandão & Joana Pinho, 2015. "Asymmetric Information And Exchange Of Information About Product Differentiation," Bulletin of Economic Research, Wiley Blackwell, vol. 67(2), pages 166-185, April.
    8. De Nijs, Romain, 2017. "Behavior-based price discrimination and customer information sharing," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 319-334.
    9. Mark Armstrong, 2005. "Recent Developments in the Economics of Price Discrimination," Industrial Organization 0511004, University Library of Munich, Germany.
    10. Qiu, Larry D. & Zhou, Wen, 2006. "International mergers: Incentives and welfare," Journal of International Economics, Elsevier, vol. 68(1), pages 38-58, January.
    11. Li, Jianpei & Zhang, Wanzhu, 2022. "Behavior-based pricing and signaling of product quality," MPRA Paper 120263, University Library of Munich, Germany, revised 03 Jan 2023.
    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. 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).
    14. Maura P. Doyle & Christopher M. Snyder, 1999. "Information Sharing and Competition in the Motor Vehicle Industry," Journal of Political Economy, University of Chicago Press, vol. 107(6), pages 1326-1364, December.
    15. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," PSE Working Papers hal-01226250, HAL.
    16. 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.
    17. Amir, Rabah & Jin, Jim Y. & Troege, Michael, 2010. "Robust results on the sharing of firm-specific information: Incentives and welfare effects," Journal of Mathematical Economics, Elsevier, vol. 46(5), pages 855-866, September.
    18. Dolores Alepuz, M. & Urbano, Amparo, 1999. "Duopoly experimentation: Cournot competition," Mathematical Social Sciences, Elsevier, vol. 37(2), pages 165-188, March.
    19. Bing Jing, 2016. "Customer Recognition in Experience vs. Inspection Good Markets," Management Science, INFORMS, vol. 62(1), pages 216-224, January.
    20. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," Working Papers hal-01226250, HAL.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:19:y:2010:i:2:p:403-433. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.