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Price Discrimination And Privacy: A Note

Author

Listed:
  • SUMIT JOSHI

    (Department of Economics, The George Washington University, USA)

  • YU-AN SUN

    (Xerox Corporation (This work was performed while the author was with Department of Computer Science, The George Washington University), USA)

  • POORVI L. VORA

    (Department of Computer Science, Academic Center, 801 22nd Street NW, Washington D.C. 20052, USA)

Abstract

In many instances of price discrimination, a seller of an item is in possession of signals from competing buyers regarding their private valuation for the item. If the seller uses this information to price discriminate against the buyer, buyers would correspondingly modify their signalling strategy. Our paper shows that the seller can gain by sometimes strategically ignoring the information contained in the signals and pricing the item in a non-discriminatory way. This "mixed" strategy induces buyers to send more informative signals in equilibrium than if the seller were to always price discriminate. Thus the seller can offset any revenue loss in states where he ignores information by the gains made in states where he can price discriminate more effectively due to the larger amount of information now communicated in the signals.

Suggested Citation

  • Sumit Joshi & Yu-An Sun & Poorvi L. Vora, 2011. "Price Discrimination And Privacy: A Note," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 83-92.
    • Handle: RePEc:wsi:igtrxx:v:13:y:2011:i:01:n:s0219198911002861
    DOI: 10.1142/S0219198911002861
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    References listed on IDEAS

    as
    1. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    2. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    3. Timothy Salmon & Bart Wilson, 2008. "Second chance offers versus sequential auctions: theory and behavior," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 47-67, January.
    4. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
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    More about this item

    Keywords

    Price discrimination; noisy signaling; partition strategies; Bayesian-Nash equilibrium; JEL Classification: D42; JEL Classification: D82; JEL Classification: L12;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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