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Voluntary Disclosure and Personalized Pricing

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  • S. Nageeb Ali
  • Greg Lewis
  • Shoshana Vasserman

Abstract

Central to privacy concerns is that firms may use consumer data to price discriminate. A common policy response is that consumers should be given control over which firms access their data and how. Since firms learn about a consumer's preferences based on the data seen and the consumer's disclosure choices, the equilibrium implications of consumer control are unclear. We study whether such measures improve consumer welfare in monopolistic and competitive markets. We find that consumer control can improve consumer welfare relative to both perfect price discrimination and no personalized pricing. First, consumers can use disclosure to amplify competitive forces. Second, consumers can disclose information to induce even a monopolist to lower prices. Whether consumer control improves welfare depends on the disclosure technology and market competitiveness. Simple disclosure technologies suffice in competitive markets. When facing a monopolist, a consumer needs partial disclosure possibilities to obtain any welfare gains.

Suggested Citation

  • S. Nageeb Ali & Greg Lewis & Shoshana Vasserman, 2019. "Voluntary Disclosure and Personalized Pricing," Papers 1912.04774, arXiv.org, revised Aug 2020.
  • Handle: RePEc:arx:papers:1912.04774
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    Cited by:

    1. Xianwen Shi & Jun Zhang, 2020. "Welfare of Price Discrimination and Market Segmentation in Duopoly," Working Papers tecipa-682, University of Toronto, Department of Economics.
    2. Dirk Bergemann & Marco Ottaviani, 2021. "Information Markets and Nonmarkets," Cowles Foundation Discussion Papers 2296, Cowles Foundation for Research in Economics, Yale University.
    3. Zhiguo He & Jing Huang & Jidong Zhou, 2020. "Open Banking: Credit Market Competition When Borrowers Own the Data," Cowles Foundation Discussion Papers 2262, Cowles Foundation for Research in Economics, Yale University.
    4. Dirk Bergemann & Alessandro Bonatti & Tan Gan, 2019. "The Economics of Social Data," Cowles Foundation Discussion Papers 2203R3, Cowles Foundation for Research in Economics, Yale University, revised Jan 2021.
    5. Doval, Laura & Skreta, Vasiliki, 2021. "Purchase history and product personalization," CEPR Discussion Papers 15969, C.E.P.R. Discussion Papers.
    6. Navin Kartik & Andreas Kleiner & Richard Van Weelden, 2020. "Delegation in Veto Bargaining," Papers 2006.06773, arXiv.org, revised May 2021.
    7. Armstrong, Mark & Zhou, Jidong, 2019. "Consumer information and the limits to competition," CEPR Discussion Papers 14162, C.E.P.R. Discussion Papers.
    8. Wenhao Li, 2020. "Using Information to Amplify Competition," Papers 2010.05342, arXiv.org, revised Nov 2020.
    9. Charles I. Jones & Christopher Tonetti, 2020. "Nonrivalry and the Economics of Data," American Economic Review, American Economic Association, vol. 110(9), pages 2819-2858, September.
    10. Zhou, Jidong, 2019. "Mixed Bundling in Oligopoly Markets," MPRA Paper 97432, University Library of Munich, Germany.
    11. Zhuang Liu & Michael Sockin & Wei Xiong, 2020. "Data Privacy and Temptation," NBER Working Papers 27653, National Bureau of Economic Research, Inc.

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    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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