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Online Price Discrimination and EU Data Privacy Law

Author

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  • Frederik Zuiderveen Borgesius

    (University of Amsterdam)

  • Joost Poort

    (University of Amsterdam)

Abstract

Online shops could offer each website customer a different price. Such personalized pricing can lead to advanced forms of price discrimination based on individual characteristics of consumers, which may be provided, obtained, or assumed. An online shop can recognize customers, for instance through cookies, and categorize them as price-sensitive or price-insensitive. Subsequently, it can charge (presumed) price-insensitive people higher prices. This paper explores personalized pricing from a legal and an economic perspective. From an economic perspective, there are valid arguments in favour of price discrimination, but its effect on total consumer welfare is ambiguous. Irrespectively, many people regard personalized pricing as unfair or manipulative. The paper analyses how this dislike of personalized pricing may be linked to economic analysis and to other norms or values. Next, the paper examines whether European data protection law applies to personalized pricing. Data protection law applies if personal data are processed, and this paper argues that that is generally the case when prices are personalized. Data protection law requires companies to be transparent about the purpose of personal data processing, which implies that they must inform customers if they personalize prices. Subsequently, consumers have to give consent. If enforced, data protection law could thereby play a significant role in mitigating any adverse effects of personalized pricing. It could help to unearth how prevalent personalized pricing is and how people respond to transparency about it.

Suggested Citation

  • Frederik Zuiderveen Borgesius & Joost Poort, 2017. "Online Price Discrimination and EU Data Privacy Law," Journal of Consumer Policy, Springer, vol. 40(3), pages 347-366, September.
    • Handle: RePEc:kap:jcopol:v:40:y:2017:i:3:d:10.1007_s10603-017-9354-z
    DOI: 10.1007/s10603-017-9354-z
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    2. Padden, Michaela, 2023. "The transformation of surveillance in the digitalisation discourse of the OECD: A brief genealogy," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 12(3), pages 1-39.
    3. Anna Priester & Thomas Robbert & Stefan Roth, 2020. "A special price just for you: effects of personalized dynamic pricing on consumer fairness perceptions," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(2), pages 99-112, April.
    4. Joshua A. Gerlick & Stephan M. Liozu, 2020. "Ethical and legal considerations of artificial intelligence and algorithmic decision-making in personalized pricing," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(2), pages 85-98, April.
    5. à lvarez-Albelo, Carmen D. & Hernández-Martín, Raúl & Padrón-Fumero, Noemi, 2020. "The effects on tourism of airfare subsidies for residents: The key role of packaging strategies," Journal of Air Transport Management, Elsevier, vol. 84(C).
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    7. Christian Niemeier & Richard Pospisil, 2021. "The Effects of User Tracking and Behavioral Management on Online Prices: A Theoretical Approach," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 386-398.
    8. de Streel, Alexandre & Jacques, Florian, 2019. "Personalised pricing and EU law," 30th European Regional ITS Conference, Helsinki 2019 205221, International Telecommunications Society (ITS).
    9. Peter Seele & Claus Dierksmeier & Reto Hofstetter & Mario D. Schultz, 2021. "Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing," Journal of Business Ethics, Springer, vol. 170(4), pages 697-719, May.
    10. Strycharz, Joanna & Duivenvoorde, Bram Benjamin, 2021. "The exploitation of vulnerability through personalised marketing communication: Are consumers protected?," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 10(4), pages 1-27.
    11. Hindermann, Christoph Michael, 2018. "Price Discrimination in Online Retail," EconStor Preprints 181294, ZBW - Leibniz Information Centre for Economics.
    12. Hufnagel, Gerrit & Schwaiger, Manfred & Weritz, Louisa, 2022. "Seeking the perfect price: Consumer responses to personalized price discrimination in e-commerce," Journal of Business Research, Elsevier, vol. 143(C), pages 346-365.
    13. Lucas, Christian, 2020. "Das Marketing-House-Konzept - ein Denkmodell zum integrierten Verständnis des Marketing-Konzepts," IU Discussion Papers - Marketing & Communication 1/2020, IU International University of Applied Sciences.
    14. Jean-Pierre I. Rest & Alan M. Sears & Li Miao & Lorna Wang, 2020. "A note on the future of personalized pricing: cause for concern," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(2), pages 113-118, April.
    15. Pade, Robin & Feurer, Sven, 2022. "The mitigating role of nostalgia for consumer price unfairness perceptions in response to disadvantageous personalized pricing," Journal of Business Research, Elsevier, vol. 145(C), pages 277-287.
    16. Haifei Yu & Shanshan Zheng & Hao Wu, 2023. "User Privacy Awareness, Incentive and Data Supply Chain Pricing Strategy," Sustainability, MDPI, vol. 15(4), pages 1-24, February.
    17. Nunan, Daniel & Di Domenico, MariaLaura, 2022. "Value creation in an algorithmic world: Towards an ethics of dynamic pricing," Journal of Business Research, Elsevier, vol. 150(C), pages 451-460.
    18. Poort, Joost & Zuiderveen Borgesius, Frederik J., 2019. "Does everyone have a price? Understanding people's attitude towards online and offline price discrimination," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 8(1), pages 1-20.

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