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Surfing Incognito: Welfare Effects of Anonymous Shopping

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  • Johan N. M. Lagerlöf

    (Department of Economics, University of Copenhagen, Denmark)

Abstract

This paper studies consumers’ incentives to hide their purchase histories when the seller’s prices depend on previous behavior. Through distinct channels, hiding both hinders and facilitates trade. Indeed, the social optimum involves hiding to some extent, yet not fully. Two opposing effects determine whether a consumer hides too much or too little: the first-period social gains are only partially internalized, and there is a private (socially irrelevant) second-period gain due to price differences. If time discounting is small, the second effect dominates and there is socially excessive hiding. This result is reversed if discounting is large.

Suggested Citation

  • Johan N. M. Lagerlöf, 2018. "Surfing Incognito: Welfare Effects of Anonymous Shopping," Discussion Papers 18-13, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:1813
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    Cited by:

    1. Li, Jianpei & Zhang, Wanzhu, 2022. "Behavior-based pricing and signaling of product quality," MPRA Paper 120263, University Library of Munich, Germany, revised 03 Jan 2023.

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    More about this item

    Keywords

    behavior-based price discrimination; dynamic pricing; consumer protection; customer recognition; privacy;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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