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Customer Infomation Sharing: Strategic Incentives and New Implications

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Abstract

We study oligopolistic firms' incentives to share customer information about past purchase history in a situation where firms are uncertain about whether a particular consumer considers the product offerings complements or substitutes. By addressing this new type of behavior-based price discrimination, we show that both the incentive to share customer information and its effects on consumers depend crucially on the relative magnitudes of the prices that would prevail in the complementary and substitute markets if consumers were fully segmented according to their preferences. This paper has important implications for merger analysis when the primary motive for merger is the acquisition of another firm's customer lists. We also find that the informational regime in which firms reside can have an influence upon the choice of product differentiation. Additionally, our analysis suggests a new role of middlemen as information aggregators.

Suggested Citation

  • Byung-Cheol Kim & Jay Pil Choi, 2007. "Customer Infomation Sharing: Strategic Incentives and New Implications," Working Papers 07-27, NET Institute, revised Sep 2007.
    • Handle: RePEc:net:wpaper:0727
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    Cited by:

    1. Chen, Yongmin & Hua, Xinyu & Maskus, Keith E., 2021. "International protection of consumer data," Journal of International Economics, Elsevier, vol. 132(C).
    2. Flavio Pino, 2022. "The microeconomics of data – a survey," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(3), pages 635-665, September.
    3. Choe, Chongwoo & Matsushima, Noriaki & Tremblay, Mark J., 2022. "Behavior-based personalized pricing: When firms can share customer information," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    4. 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.
    5. Bernard Caillaud & Romain de Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," Working Papers halshs-00622291, HAL.
    6. Bernard Caillaud & Romain de Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," PSE Working Papers halshs-00622291, HAL.
    7. Alessandro Acquisti & Curtis Taylor & Liad Wagman, 2016. "The Economics of Privacy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 442-492, June.
    8. Chongwoo Choe & Jiajia Cong & Chengsi Wang, 2024. "Softening Competition Through Unilateral Sharing of Customer Data," Management Science, INFORMS, vol. 70(1), pages 526-543, January.
    9. De Nijs, Romain, 2017. "Behavior-based price discrimination and customer information sharing," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 319-334.
    10. Maran Marimuthu & Haslindar Ibrahim, 2013. "A Case Study of the Local Bank Merger: Is the Acquiring Entity Better Off?," Accounting and Finance Research, Sciedu Press, vol. 2(2), pages 1-22, May.
    11. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," PSE Working Papers hal-01226250, HAL.
    12. Romain de Nijs, 2015. "Behavior-based price discrimination and customer information sharing," Working Papers hal-01226250, HAL.
    13. Ronen Gradwohl & Moshe Tennenholtz, 2022. "Pareto-Improving Data-Sharing," Papers 2205.11295, arXiv.org.
    14. Chongwoo Choe & Noriaki Matsushima & Mark J. Tremblay, 2020. "Behavior-Based Personalized Pricing: When Firms Can Share Customer Information," ISER Discussion Paper 1083, Institute of Social and Economic Research, Osaka University.
    15. Bernard Caillaud & Romain De Nijs, 2014. "Strategic Loyalty Reward in Dynamic Price Discrimination," Marketing Science, INFORMS, vol. 33(5), pages 725-742, September.
    16. Shy, Oz & Stenbacka, Rune, 2013. "Investment in customer recognition and information exchange," Information Economics and Policy, Elsevier, vol. 25(2), pages 92-106.
    17. Chuang, Shu-Hui & Lin, Hong-Nan, 2013. "The roles of infrastructure capability and customer orientation in enhancing customer-information quality in CRM systems: Empirical evidence from Taiwan," International Journal of Information Management, Elsevier, vol. 33(2), pages 271-281.

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    More about this item

    Keywords

    Customer Information Sharing; Complements and Substitutes; Product Differentiation; Behavior-Based Price Discrimination; Merger and Acquisition; Middlemen;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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