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Selling customer information to competing firms

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  • Clavorà Braulin, Francesco
  • Valletti, Tommaso

Abstract

We consider a data broker that holds precise information about customer preferences. The data broker can sell this data set either exclusively to one of two differentiated competing firms, or to both of them. If a downstream firm obtains the data set, it can practice personalized pricing, else it has to offer a uniform price to customers. The first-best allocation can be achieved when data are sold non exclusively, but this never arises in equilibrium. The data broker instead sells the data set exclusively either to the high quality firm or to the low quality firm rival, according to their quality-adjusted cost differential. This leads to inefficient allocations.

Suggested Citation

  • Clavorà Braulin, Francesco & Valletti, Tommaso, 2016. "Selling customer information to competing firms," Economics Letters, Elsevier, vol. 149(C), pages 10-14.
    • Handle: RePEc:eee:ecolet:v:149:y:2016:i:c:p:10-14
    DOI: 10.1016/j.econlet.2016.10.005
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. 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).
    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. Paul Belleflamme & Wing Man Wynne Lam, & Wouter Vergote, 2020. "Competitive Imperfect Price Discrimination and Market Power," Marketing Science, INFORMS, vol. 39(5), pages 996-1015, September.
    5. Abrardi, Laura & Cambini, Carlo, 2022. "Carpe Data: Protecting online privacy with naive users," Information Economics and Policy, Elsevier, vol. 60(C).
    6. Clavorà Braulin, Francesco, 2023. "The effects of personal information on competition: Consumer privacy and partial price discrimination," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    7. Morlok, Tina & Matt, Christian & Hess, Thomas, 2017. "Privatheitsforschung in den Wirtschaftswissenschaften: Entwicklung, Stand und Perspektiven," Working Papers 1/2017, University of Munich, Munich School of Management, Institute for Information Systems and New Media.
    8. Chongwoo Choe & Stephen King & Noriaki Matsushima, 2017. "Pricing with Cookies: Behavior-Based Price Discrimination and Spatial Competition," Monash Economics Working Papers 07-17, Monash University, Department of Economics.
    9. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2021. "Selling strategic information in digital competitive markets," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 283-313, June.
    10. Chongwoo Choe & Stephen King & Noriaki Matsushima, 2018. "Pricing with Cookies: Behavior-Based Price Discrimination and Spatial Competition," Management Science, INFORMS, vol. 64(12), pages 5669-5687, December.
    11. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2022. "Market for Information and Selling Mechanisms," CER-ETH Economics working paper series 22/367, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    12. Noriaki Matsushima & Tomomichi Mizuno & Cong Pan, 2023. "Personalized pricing with heterogeneous mismatch costs," Southern Economic Journal, John Wiley & Sons, vol. 90(2), pages 369-388, October.
    13. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2018. "Selling Strategic Information in Digital Competitive Markets," Working Papers hal-01794886, HAL.
    14. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2018. "Selling Strategic Information in Digital Competitive Markets," CESifo Working Paper Series 7078, CESifo.
    15. Paul Belleflamme & Wing Man Wynne Lam & Wouter Vergote, 2017. "Price Discrimination and Dispersion under Asymmetric Profiling of Consumers," Working Papers halshs-01502452, HAL.
    16. 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.
    17. Yiquan Gu & Leonardo Madio & Carlo Reggiani, 2019. "Exclusive Data, Price Manipulation and Market Leadership," CESifo Working Paper Series 7853, CESifo.

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    More about this item

    Keywords

    Personalized pricing; Vertical product differentiation; Exclusivity;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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