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Good Data and Bad Data: The Welfare Effects of Price Discrimination

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  • Maryam Farboodi
  • Nima Haghpanah
  • Ali Shourideh

Abstract

We ask when additional data collection by a monopolist to engage in price discrimination monotonically increases or decreases weighted surplus. To answer this question, we develop a model to study endogenous market segmentation subject to residual uncertainty. We give a complete characterization of when data collection is good or bad for surplus, which consists of a reduction of the problem to one with only two demand curves, and a condition for the two-demand-curves case that highlights three distinct effects of information on welfare. These results provide insights into when data collection and usage for price discrimination should be allowed.

Suggested Citation

  • Maryam Farboodi & Nima Haghpanah & Ali Shourideh, 2025. "Good Data and Bad Data: The Welfare Effects of Price Discrimination," Papers 2502.03641, arXiv.org.
    • Handle: RePEc:arx:papers:2502.03641
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    File URL: http://arxiv.org/pdf/2502.03641
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