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Strategic responses to personalized pricing and demand for privacy: An experiment

Author

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  • Bó, Inácio
  • Chen, Li
  • Hakimov, Rustamdjan

Abstract

We consider situations in which consumers are aware that a statistical model determines the price of a product based on their observed behavior. Using a novel experiment varying the context similarity between participant data and a product, we find that participants manipulate their responses to a survey regarding personal characteristics, and manipulation is more successful when the contexts are similar. Moreover, participants demand less privacy, and make less optimal privacy choices when the contexts are less similar. Our findings highlight the importance of data privacy policies in the age of big data, in which behavior in apparently unrelated contexts might affect prices.

Suggested Citation

  • Bó, Inácio & Chen, Li & Hakimov, Rustamdjan, 2024. "Strategic responses to personalized pricing and demand for privacy: An experiment," Games and Economic Behavior, Elsevier, vol. 148(C), pages 487-516.
    • Handle: RePEc:eee:gamebe:v:148:y:2024:i:c:p:487-516
    DOI: 10.1016/j.geb.2024.10.008
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    More about this item

    Keywords

    Price discrimination; Personalized pricing; Strategic behavior; Privacy; Experiments;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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