Winners and losers of gatekeeper-induced consumer preference distortion in promoting personalized pricing by asymmetric firms

We present a model of duopoly competition in a marketplace with a Hotelling segment of consumers, where two business users (firms) have access to raw consumer data. The firms can choose between personalized prices (PP), using a costly personalized program device provided by the marketplace, or uniform prices at no additional cost. One firm has a higher level of experience in utilizing consumer data, resulting in a lower cost of price personalization (PP device cost). In order to promote its personalized program device, the marketplace may have an incentive to distort consumer preferences from a uniform to a triangular distribution. Our findings indicate that the marketplace is more likely to distort consumer preferences under specific conditions. This occurs when there is moderate asymmetry in experience between the firms and a high tariff for the program, or when there is weak asymmetry and a moderate program tariff. In these parameter regions, the distortion of consumer preferences negatively impact the profits of the sellers while benefiting the consumers. These insights contribute to a better understanding of the dynamics of digital marketplaces and have implications for policymakers and competition authorities.