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Targeted pricing and customer data sharing among rivals

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Author Info

  • Jentzsch, Nicola
  • Sapi, Geza
  • Suleymanova, Irina

Abstract

It is increasingly observable that competitors in different industries share customer data, which can be used for targeted pricing. We propose a modified Hotelling model with two-dimensional consumer heterogeneity to analyze the incentives for such sharing and its ensuing welfare effects. We show that these incentives depend on the type of customer data and on consumer heterogeneity in the strength of brand preferences. Only data on consumer transportation cost parameters is shared. The incentives to do so are stronger if consumers are relatively homogeneous. Customer data sharing is most likely to be detrimental to consumer surplus, while the effect on social welfare can be positive.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 31 (2013)
Issue (Month): 2 ()
Pages: 131-144

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Handle: RePEc:eee:indorg:v:31:y:2013:i:2:p:131-144

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Web page: http://www.elsevier.com/locate/inca/505551

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Keywords: Customer data sharing; Price discrimination; Modified Hotelling model;

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References

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Cited by:
  1. Shy, Oz & Stenbacka, Rune, 2013. "Investment in customer recognition and information exchange," Information Economics and Policy, Elsevier, vol. 25(2), pages 92-106.
  2. Sapi, Geza & Suleymanova, Irina, 2013. "Consumer flexibility, data quality and targeted pricing," DICE Discussion Papers 117, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  3. Baye, Irina & Hasnas, Irina, 2014. "Consumer flexibility, data quality and location choice," DICE Discussion Papers 139, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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