Online Privacy and Price Discrimination
AbstractWhen a firm is able to recognize its previous customers, it may use information about their purchase histories to price discriminate. We analyze a model with a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity and avoid being identified as past customers, possibly at an (exogenous) cost. When consumers can costlessly maintain their anonymity, they all individually choose to do so, which paradoxically results in the highest profit for the firm. Increasing the cost of anonymity can benefit consumers, but only up to a point, after which the effect is reversed.
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Bibliographic InfoPaper provided by David K. Levine in its series Levine's Working Paper Archive with number 661465000000000298.
Date of creation: 26 Oct 2010
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Web page: http://www.dklevine.com/
Other versions of this item:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
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