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Consumer foresight, customer data, and investment in targeting technology

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  • Irina Baye
  • Geza Sapi

Abstract

We analyze competing firms’ incentives to adopt a technology that allows making refined targeted offers to returning customers. Consumer foresight is crucial for firms’ decisions. Although our setup is symmetric, when consumers are myopic, the unique equilibrium is asymmetric in firms’ technology adoption decisions. Contrary to conventional wisdom, consumers may be better off being myopic than sophisticated. Light privacy policy may benefit consumers if it reduces the costs of handling customer data and avoids strict obligations on firms to inform consumers about data use, which would erode investment incentives into targeting technology.

Suggested Citation

  • Irina Baye & Geza Sapi, 2020. "Consumer foresight, customer data, and investment in targeting technology," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(4), pages 363-386, September.
    • Handle: RePEc:bla:scotjp:v:67:y:2020:i:4:p:363-386
    DOI: 10.1111/sjpe.12244
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    References listed on IDEAS

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