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Personalized pricing versus history-based pricing: implications for privacy policy

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  • Miettinen, Topi
  • Stenbacka, Rune

Abstract

We compare personalized and history-based pricing and show that personalized pricing harms consumer surplus and total welfare when evaluated over a two-period horizon. The model is characterized by two key features: (1) the discounted two-period profits are invariant to whether personalized or history-based pricing is applied because higher period-2 profits with personalized pricing are offset by lower period-1 profits. (2) Consumer mobility is invariant to whether history-based or personalized pricing is applied, but personalized pricing leads to a higher proportion of inefficient switching, and a lower proportion of efficient switching.

Suggested Citation

  • Miettinen, Topi & Stenbacka, Rune, 2015. "Personalized pricing versus history-based pricing: implications for privacy policy," Information Economics and Policy, Elsevier, vol. 33(C), pages 56-68.
  • Handle: RePEc:eee:iepoli:v:33:y:2015:i:c:p:56-68
    DOI: 10.1016/j.infoecopol.2015.10.003
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    References listed on IDEAS

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    Cited by:

    1. Frederik Zuiderveen Borgesius & Joost Poort, 2017. "Online Price Discrimination and EU Data Privacy Law," Journal of Consumer Policy, Springer, vol. 40(3), pages 347-366, September.

    More about this item

    Keywords

    Personalized pricing; History-based pricing; Customer recognition; Price discrimination; Privacy; Switching cost;

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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