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Price discrimination and product quality under opt-in privacy regulation

Author

Listed:
  • Chiara Conti

    (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy)

  • Pierfrancesco Reverberi

    (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy)

Abstract

We study how privacy regulation limiting the scope for price discrimination by a monopolist who sells online affects product quality and consumer surplus. We consider an opt-in regime where consumers may share personal data or not, in line with the recent EU GDPR. If consumers share data, they gain an additional benefit from buying related to the complementarity between information and quality, and they pay personalized prices instead of a uniform price. We find that, if the complementarity is strong enough, then product quality is higher with than without the opt-in regime. We also find that the opt-in regime has conflicting effects on consumers with different attitudes towards privacy, and that an increase in quality is a necessary condition for improving total consumer surplus. Overall, this study contributes to the debate on privacy protection by stressing the importance of analysing the relation between personal information and product quality.

Suggested Citation

  • Chiara Conti & Pierfrancesco Reverberi, 2019. "Price discrimination and product quality under opt-in privacy regulation," DIAG Technical Reports 2019-07, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    • Handle: RePEc:aeg:report:2019-07
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    References listed on IDEAS

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    Keywords

    Privacy regulation ; Opt-in regime ; Price discrimination ; Product quality;
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