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Good Data and Bad Data: The Welfare Effects of Price Discrimination

Author

Listed:
  • Maryam Farboodi
  • Nima Haghpanah
  • Ali Shourideh

Abstract

We study how a monopolist's use of consumer data for price discrimination affects welfare. To answer this question, we develop a model of market segmentation subject to residual uncertainty. We fully characterize when data usage monotonically increases or decreases welfare or when the effect is non-monotone. The characterization reduces the problem to one with only two demand curves, and gives a condition for the two-demand-curves case that highlights that information affects welfare in three distinct ways. In the non-monotone case, we provide tight bounds on the welfare effects of information and identify the best local direction for providing additional information.

Suggested Citation

  • Maryam Farboodi & Nima Haghpanah & Ali Shourideh, 2025. "Good Data and Bad Data: The Welfare Effects of Price Discrimination," Papers 2502.03641, arXiv.org, revised Nov 2025.
    • Handle: RePEc:arx:papers:2502.03641
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    Cited by:

    1. Philipp Strack & Kai Hao Yang, 2025. "Non-Discriminatory Personalized Pricing," Cowles Foundation Discussion Papers 2447, Cowles Foundation for Research in Economics, Yale University.
    2. Vladimir Asriyan & Alexandre Kohlhas, 2025. "The macroeconomics of data: Scale, product choice, and pricing in the information age," Economics Working Papers 1904, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Alexander Kohlhas & Vladimir Asriyan, 2025. "The Macroeconomics of Data: Scale, Product Choice, and Pricing in the Information Age," Working Papers 1486, Barcelona School of Economics.
    4. Alexandre Kohlhas & Vladimir Asriyan, 2025. "The Macroeconomics of Data: Scale, Product Choice, and Pricing in the Information Age," Economics Series Working Papers 1073, University of Oxford, Department of Economics.
    5. Philipp Strack & Kai Hao Yang, 2025. "Non-Discriminatory Personalized Pricing," Papers 2506.20925, arXiv.org.

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