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Softening Competition through Unilateral Sharing of Customer Data

Author

Listed:
  • Chongwoo Choe

    (Department of Economics, Monash University)

  • Jiajia Cong

    (School of Management, Fudan University)

  • Chengsi Wang

    (Department of Economics, Monash University)

Abstract

We study how a data-rich firm can benefit by unilaterally sharing its customer data with a data-poor competitor when the data can be used for price discrimination. By sharing data on the segment of market that is more loyal to the competitor while keeping the data on the competitor's most loyal segment to itself, the firm can induce the competitor to raise its price for consumers it does not have data on. Such data sharing is an example of a fat-cat strategy as it softens price competition that follows data sharing. Although consumer surplus decreases as a result of data sharing, total surplus can increase when the sharing firm concedes its market share to the competitor, which improves the quality of consumer-firm matching.

Suggested Citation

  • Chongwoo Choe & Jiajia Cong & Chengsi Wang, 2021. "Softening Competition through Unilateral Sharing of Customer Data," Monash Economics Working Papers 2021-10, Monash University, Department of Economics.
    • Handle: RePEc:mos:moswps:2021-10
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    References listed on IDEAS

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    Cited by:

    1. Choe, Chongwoo & Matsushima, Noriaki & Tremblay, Mark J., 2022. "Behavior-based personalized pricing: When firms can share customer information," International Journal of Industrial Organization, Elsevier, vol. 82(C).

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    More about this item

    Keywords

    customer data sharing; price discrimination;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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