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Voluntary Disclosure and Personalized Pricing

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  • S. Nageeb Ali
  • Gregory Lewis
  • Shoshana Vasserman

Abstract

A concern central to the economics of privacy is that firms may use consumer data to price discriminate. A common response is that consumers should have control over their data and the ability to choose how firms access it. Since firms draw inferences based on both the data seen as well as the consumer’s disclosure choices, the strategic implications of this proposal are unclear. We investigate whether such measures improve consumer welfare in monopolistic and competitive environments. We find that consumer control can guarantee gains for every consumer type relative to both perfect price discrimination and no personalized pricing. This result is driven by two ideas. First, consumers can use disclosure to amplify competition between firms. Second, consumers can share information that induces a seller—even a monopolist—to make price concessions. Furthermore, whether consumer control improves consumer surplus depends on both the technology of disclosure and the competitiveness of the marketplace. In a competitive market, simple disclosure technologies such as “track / do-not-track” suffice for guaranteeing gains in consumer welfare. However, in a monopolistic market, welfare gains require richer forms of disclosure technology whereby consumers can decide how much information they would like to convey.

Suggested Citation

  • S. Nageeb Ali & Gregory Lewis & Shoshana Vasserman, 2019. "Voluntary Disclosure and Personalized Pricing," NBER Working Papers 26592, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26592
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    Cited by:

    1. Armstrong, Mark & Zhou, Jidong, 2019. "Consumer information and the limits to competition," CEPR Discussion Papers 14162, C.E.P.R. Discussion Papers.
    2. Dirk Bergemann & Alessandro Bonatti & Tan Gan, 2019. "The Economics of Social Data," Cowles Foundation Discussion Papers 2203R4, Cowles Foundation for Research in Economics, Yale University, revised Oct 2021.
    3. Zhiguo He & Jing Huang & Jidong Zhou, 2020. "Open Banking: Credit Market Competition When Borrowers Own the Data," NBER Working Papers 28118, National Bureau of Economic Research, Inc.
    4. Zhou, Jidong, 2019. "Mixed Bundling in Oligopoly Markets," MPRA Paper 97432, University Library of Munich, Germany.
    5. Doval, Laura & Skreta, Vasiliki, 2021. "Purchase history and product personalization," CEPR Discussion Papers 15969, C.E.P.R. Discussion Papers.
    6. 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.
    7. Dirk Bergemann & Marco Ottaviani, 2021. "Information Markets and Nonmarkets," Cowles Foundation Discussion Papers 2296, Cowles Foundation for Research in Economics, Yale University.
    8. Bergemann, Dirk & Ottaviani, Marco, 2021. "Information Markets and Nonmarkets," CEPR Discussion Papers 16459, C.E.P.R. Discussion Papers.
    9. Navin Kartik & Andreas Kleiner & Richard Van Weelden, 2020. "Delegation in Veto Bargaining," Papers 2006.06773, arXiv.org, revised May 2021.
    10. Xianwen Shi & Jun Zhang, 2020. "Welfare of Price Discrimination and Market Segmentation in Duopoly," Working Papers tecipa-682, University of Toronto, Department of Economics.
    11. Zhuang Liu & Michael Sockin & Wei Xiong, 2020. "Data Privacy and Temptation," NBER Working Papers 27653, National Bureau of Economic Research, Inc.
    12. Wenhao Li, 2020. "Using Information to Amplify Competition," Papers 2010.05342, arXiv.org, revised Nov 2020.

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    More about this item

    JEL classification:

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

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