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Behavior-Based Personalized Pricing: When Firms Can Share Customer Information

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  • Chongwoo Choe
  • Noriaki Matsushima
  • Mark J. Tremblay

Abstract

We study a model of behavior-based price discrimination where asymmetric firms can agree to share customer information that can be used for personalized pricing. We show that information sharing is individually rational for firms as it softens upfront competition when information is gathered, consumers are worse off as a result, but total surplus can increase thanks to the improved quality of matching between firms and consumers. These findings are robust to firm asymmetries and varying discount factors for consumers and firms.

Suggested Citation

  • Chongwoo Choe & Noriaki Matsushima & Mark J. Tremblay, 2020. "Behavior-Based Personalized Pricing: When Firms Can Share Customer Information," ISER Discussion Paper 1083r, Institute of Social and Economic Research, Osaka University, revised Jul 2021.
    • Handle: RePEc:dpr:wpaper:1083r
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    Cited by:

    1. Ratul Das Chaudhury & Chongwoo Choe, 2023. "Digital Privacy: GDPR and Its Lessons for Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(2), pages 204-220, June.
    2. Masuyama, Ryo, 2023. "Endogenous privacy and heterogeneous price sensitivity," MPRA Paper 117316, University Library of Munich, Germany.
    3. Qiuyu Lu & Noriaki Matsushima, 2023. "Personalized pricing when consumers can purchase multiple items," ISER Discussion Paper 1192, Institute of Social and Economic Research, Osaka University.
    4. 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).
    5. Tulabandhula, Theja & Ouksel, Aris M. & Nguyen, Son The, 2023. "Impact of customer loyalty and differing firm costs on price discrimination in an infinite horizon setting," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 344-377.
    6. Michel Tolksdorf, 2023. "On Point Predictions and Reference Dependence in Behavior-Based Pricing Experiments," Journal of Economics and Behavioral Studies, AMH International, vol. 15(1), pages 1-14.
    7. Shuaicheng Liu, 2023. "Location choice with asymmetric data in the Hotelling model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(4), pages 855-878, December.

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    More about this item

    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

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