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Selling strategic information in digital competitive markets

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  • David Bounie
  • Antoine Dubus
  • Patrick Waelbroeck

Abstract

This article investigates the strategies of a data broker selling information to one or to two competing firms. The data broker combines segments of the consumer demand that allow firms to third‐degree price discriminate consumers. We show that the data broker (1) sells information on consumers with the highest willingness to pay; (2) keeps consumers with low willingness to pay unidentified. The data broker strategically chooses to withhold information on consumer demand to soften competition between firms. These results hold under first‐degree price discrimination, which is a limit case when information is perfect.

Suggested Citation

  • David Bounie & Antoine Dubus & Patrick Waelbroeck, 2021. "Selling strategic information in digital competitive markets," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 283-313, June.
    • Handle: RePEc:bla:randje:v:52:y:2021:i:2:p:283-313
    DOI: 10.1111/1756-2171.12369
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    Citations

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    Cited by:

    1. Bruno Jullien & Markus Reisinger & Patrick Rey, 2023. "Personalized Pricing and Distribution Strategies," Management Science, INFORMS, vol. 69(3), pages 1687-1702, March.
    2. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2022. "Data brokers co-opetition [The impact of big data on firm performance: an empirical investigation]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 820-839.
    3. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2023. "Competition Between Strategic Data Intermediaries with Implications for Merger Policy," Working Papers hal-03336520, HAL.
    4. 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).
    5. Charlson, G., 2021. "Third-Degree Price Discrimination in the Age of Big Data," Janeway Institute Working Papers 2104, Faculty of Economics, University of Cambridge.
    6. Charlson, G., 2021. "Third-Degree Price Discrimination in the Age of Big Data," Cambridge Working Papers in Economics 2159, Faculty of Economics, University of Cambridge.
    7. Belleflamme, Paul & Johnen, Johannes, 2023. "Non-Price Strategies of Marketplaces: A Survey," LIDAM Discussion Papers CORE 2023015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Groh, Carl-Christian, 2023. "Search, Data, and Market Power," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277701, Verein für Socialpolitik / German Economic Association.
    9. Sumit Shrivastav, 2023. "Profitability of behavior-based price discrimination," Marketing Letters, Springer, vol. 34(4), pages 535-547, December.
    10. Rhodes, Andrew & Zhou, Jidong, 2022. "Personalized Pricing and Competition," MPRA Paper 112988, University Library of Munich, Germany.
    11. Oh, Ga-Eun (Grace) & Aliyev, Murod & Kafouros, Mario & Au, Alan Kai Ming, 2022. "The role of consumer characteristics in explaining product innovation performance: Evidence from emerging economies," Journal of Business Research, Elsevier, vol. 149(C), pages 713-727.
    12. Clavorà Braulin, Francesco, 2023. "The effects of personal information on competition: Consumer privacy and partial price discrimination," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    13. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2022. "Market for Information and Selling Mechanisms," CER-ETH Economics working paper series 22/367, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    14. Flavio Pino, 2022. "The microeconomics of data – a survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 635-665, September.
    15. Bruno Jullien & Markus Reisinger & Patrick Rey, 2023. "Personalized Pricing and Distribution Strategies," Post-Print hal-04282548, HAL.
    16. Michael Choi & Guillaume Rocheteau, 2024. "Information acquisition and price discrimination in dynamic, decentralized markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 53, pages 1-46, July.
    17. Dominic Coey & Bradley J. Larsen & Kane Sweeney & Caio Waisman, 2021. "Scalable Optimal Online Auctions," Marketing Science, INFORMS, vol. 40(4), pages 593-618, July.
    18. Shuaicheng Liu, 2023. "Location choice with asymmetric data in the Hotelling model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 855-878, December.
    19. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2021. "Competition and Mergers with Strategic Data Intermediaries," CESifo Working Paper Series 9339, CESifo.
    20. Georgios Petropoulos & Bertin Martens & Geoffrey Parker & Marshall Van Alstyne, 2023. "Platform Competition and Information Sharing," CESifo Working Paper Series 10663, CESifo.

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