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Selling Strategic Information in Digital Competitive Markets

Author

Listed:
  • David Bounie
  • Antoine Dubus
  • Patrick Waelbroeck

Abstract

This paper investigates the strategies of a data broker in selling information to one or to two competing firms that can price-discriminate consumers. The data broker can strategically choose any segment of the consumer demand (information structure) to sell to firms that implement third-degree price-discrimination. We show that the equilibrium profits of the data broker are maximized when (1) information identifies the consumers with the highest willingness to pay; (2) consumers with a low willingness to pay remain unidentified; (3) the data broker sells two symmetrical information structures. The data broker therefore strategically sells partial information on consumers in order to soften competition between firms. Extending the baseline model, we prove that these results hold under first-degree price-discrimination.

Suggested Citation

  • David Bounie & Antoine Dubus & Patrick Waelbroeck, 2018. "Selling Strategic Information in Digital Competitive Markets," CESifo Working Paper Series 7078, CESifo.
    • Handle: RePEc:ces:ceswps:_7078
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David Bounies & Antoine Dubus & Patrick Waelbroeck, 2020. "Market for Information and Selling Mechanisms," Working Papers ECARES 2020-07, ULB -- Universite Libre de Bruxelles.
    2. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2020. "Market for Information and Selling Mechanisms," CESifo Working Paper Series 8307, CESifo.
    3. 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.
    4. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2022. "Collecting and Selling Consumer Information: Selling Mechanisms Matter," Working Papers hal-02288708, HAL.
    5. Clavorà Braulin, Francesco, 2021. "The effects of personal information on competition: Consumer privacy and partial price discrimination," ZEW Discussion Papers 21-007, ZEW - Leibniz Centre for European Economic Research.
    6. Koski, Heli, 2018. "How Do Competition Policy and Data Brokers Shape Product Market Competition?," ETLA Working Papers 61, The Research Institute of the Finnish Economy.
    7. Axel Gautier & Ashwin Ittoo & Pieter Cleynenbreugel, 2020. "AI algorithms, price discrimination and collusion: a technological, economic and legal perspective," European Journal of Law and Economics, Springer, vol. 50(3), pages 405-435, December.

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    More about this item

    Keywords

    data broker; information structure; price-discrimination;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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