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Targeted pricing and customer data sharing among rivals

Author

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  • Jentzsch, Nicola
  • Sapi, Geza
  • Suleymanova, Irina

Abstract

It is increasingly observable that competitors in different industries share customer data, which can be used for targeted pricing. We propose a modified Hotelling model with two-dimensional consumer heterogeneity to analyze the incentives for such sharing and its ensuing welfare effects. We show that these incentives depend on the type of customer data and on consumer heterogeneity in the strength of brand preferences. Only data on consumer transportation cost parameters is shared. The incentives to do so are stronger if consumers are relatively homogeneous. Customer data sharing is most likely to be detrimental to consumer surplus, while the effect on social welfare can be positive.

Suggested Citation

  • Jentzsch, Nicola & Sapi, Geza & Suleymanova, Irina, 2013. "Targeted pricing and customer data sharing among rivals," International Journal of Industrial Organization, Elsevier, vol. 31(2), pages 131-144.
    • Handle: RePEc:eee:indorg:v:31:y:2013:i:2:p:131-144
    DOI: 10.1016/j.ijindorg.2012.11.004
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    More about this item

    Keywords

    Customer data sharing; Price discrimination; Modified Hotelling model;
    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
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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