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Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game

Author

Listed:
  • Iaria, Alessandro
  • Pape, Louis
  • Helmers, Christian
  • Wagner, Stefan
  • Runge, Julian

Abstract

We use a unique dataset from a mobile puzzle game to investigate the welfare consequences of price discrimination. We rely on experimental variation to characterize player behavior and estimate a model of demand for game content. Our counterfactual simulations show that optimal uniform pricing would increase profit by +340% with respect to the game developer’s observed pricing. This is almost the same as the increase in profit associated with first-degree price discrimination (+347%). All pricing strategies considered—including optimal uniform pricing—would induce a transfer of surplus from players to game developer without, however, generating sizeable dead-weight losses.

Suggested Citation

  • Iaria, Alessandro & Pape, Louis & Helmers, Christian & Wagner, Stefan & Runge, Julian, 2021. "Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game," CEPR Discussion Papers 16706, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16706
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    More about this item

    Keywords

    Price discrimination; Personalized pricing; Mobile apps; Online games; Freemium;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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