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Online Privacy and Price Discrimination

Author

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  • Curtis R. Taylor
  • Vincent Conitzer
  • Liad Wagman

Abstract

When a firm is able to recognize its previous customers, it may use information about their purchase histories to price discriminate. We analyze a model with a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity and avoid being identified as past customers, possibly at an (exogenous) cost. When consumers can costlessly maintain their anonymity, they all individually choose to do so, which paradoxically results in the highest profit for the firm. Increasing the cost of anonymity can benefit consumers, but only up to a point, after which the effect is reversed.
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Suggested Citation

  • Curtis R. Taylor & Vincent Conitzer & Liad Wagman, 2010. "Online Privacy and Price Discrimination," Levine's Working Paper Archive 661465000000000298, David K. Levine.
    • Handle: RePEc:cla:levarc:661465000000000298
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    File URL: http://www.dklevine.com/archive/refs4661465000000000298.pdf
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    References listed on IDEAS

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    1. J. Miguel Villas-Boas, 1999. "Dynamic Competition with Customer Recognition," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 604-631, Winter.
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    Cited by:

    1. Kummer, Michael & Schulte, Patrick, 2014. "Money and privacy: Android market evidence," ZEW Discussion Papers 14-131, ZEW - Leibniz Centre for European Economic Research.
    2. Michael Kummer & Patrick Schulte, 2019. "When Private Information Settles the Bill: Money and Privacy in Google’s Market for Smartphone Applications," Management Science, INFORMS, vol. 65(8), pages 3470-3494, August.
    3. Arieh Gavious & Ella Segev, 2017. "Price Discrimination Based on Buyers’ Purchase History," Dynamic Games and Applications, Springer, vol. 7(2), pages 229-265, June.
    4. Kesler, Reinhold & Kummer, Michael E. & Schulte, Patrick, 2017. "Mobile applications and access to private data: The supply side of the Android ecosystem," ZEW Discussion Papers 17-075, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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