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Online Privacy and Price Discrimination

Author

Listed:
  • Vincent Conitzer
  • Curtis Taylor
  • Liad Wagman

Abstract

When a firm is able to recognize its previous customers, it may use information about their purchase histories to price discriminate. We analyze a model with a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity and avoid being identified as past customers, possibly at an (exogenous) cost. When consumers can costlessly maintain their anonymity, they all individually choose to do so, which paradoxically results in the highest profit for the firm. Increasing the cost of anonymity can benefit consumers, but only up to a point, after which the effect is reversed.

Suggested Citation

  • Vincent Conitzer & Curtis Taylor & Liad Wagman, 2010. "Online Privacy and Price Discrimination," Working Papers 10-79, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:10-79
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    References listed on IDEAS

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    1. Aruoba, S. Boragan & Fernandez-Villaverde, Jesus & Rubio-Ramirez, Juan F., 2006. "Comparing solution methods for dynamic equilibrium economies," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2477-2508, December.
    2. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
    3. Judd, Kenneth L., 1992. "Projection methods for solving aggregate growth models," Journal of Economic Theory, Elsevier, vol. 58(2), pages 410-452, December.
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    Citations

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    Cited by:

    1. Kummer, Michael & Schulte, Patrick, 2014. "Money and privacy: Android market evidence," ZEW Discussion Papers 14-131, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Arieh Gavious & Ella Segev, 2017. "Price Discrimination Based on Buyers’ Purchase History," Dynamic Games and Applications, Springer, vol. 7(2), pages 229-265, June.
    3. Kummer, Michael E. & Schulte, Patrick, 2016. "When private information settles the bill: Money and privacy in Google's market for smartphone applications," ZEW Discussion Papers 16-031, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    Privacy; anonymity; price discrimination; electronic commerce;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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