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Customer Infomation Sharing: Strategic Incentives and New Implications

We study oligopolistic firms' incentives to share customer information about past purchase history in a situation where firms are uncertain about whether a particular consumer considers the product offerings complements or substitutes. By addressing this new type of behavior-based price discrimination, we show that both the incentive to share customer information and its effects on consumers depend crucially on the relative magnitudes of the prices that would prevail in the complementary and substitute markets if consumers were fully segmented according to their preferences. This paper has important implications for merger analysis when the primary motive for merger is the acquisition of another firm's customer lists. We also find that the informational regime in which firms reside can have an influence upon the choice of product differentiation. Additionally, our analysis suggests a new role of middlemen as information aggregators.

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File URL: http://www.netinst.org/Choi-Kim_07-27.pdf
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Paper provided by NET Institute in its series Working Papers with number 07-27.

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Length: 30 pages
Date of creation: Sep 2007
Date of revision: Sep 2007
Handle: RePEc:net:wpaper:0727
Contact details of provider: Web page: http://www.NETinst.org/

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  1. Thomas Gehrig & Rune Stenbacka, 2000. "Information Sharing in Banking: A Collusive Device?," Econometric Society World Congress 2000 Contributed Papers 1837, Econometric Society.
  2. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  3. Banal-Estanol, Albert, 2007. "Information-sharing implications of horizontal mergers," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 31-49, February.
  4. Josh Lerner & Jean Tirole, 2004. "Efficient Patent Pools," American Economic Review, American Economic Association, vol. 94(3), pages 691-711, June.
  5. Alessandro Pavan, 2004. "On the Optimality of Privacy in Sequential Contracting," Theory workshop papers 658612000000000067, UCLA Department of Economics.
  6. Liu, Qihong & Serfes, Konstantinos, 2006. "Customer information sharing among rival firms," European Economic Review, Elsevier, vol. 50(6), pages 1571-1600, August.
  7. Armantier, Olivier & Richard, Oliver, 2003. "Entry and Exchanges of Cost Information," Journal of Regulatory Economics, Springer, vol. 24(2), pages 223-41, September.
  8. Alessandro Acquisti & Hal R. Varian, 2005. "Conditioning Prices on Purchase History," Marketing Science, INFORMS, vol. 24(3), pages 367-381, May.
  9. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-43, March.
  10. Richard N. Clarke, 1983. "Collusion and the Incentives for Information Sharing," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 383-394, Autumn.
  11. Gary Biglaiser, 1993. "Middlemen as Experts," RAND Journal of Economics, The RAND Corporation, vol. 24(2), pages 212-223, Summer.
  12. Steven Tadelis, 1999. "What's in a Name? Reputation as a Tradeable Asset," American Economic Review, American Economic Association, vol. 89(3), pages 548-563, June.
  13. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  14. Li, Yiting, 1998. "Middlemen and private information," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 131-159, June.
  15. Fried, Dov, 1984. "Incentives for Information Production and Disclosure in a Duopolistic Environment," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 367-81, May.
  16. Drew Fudenberg & Jean Tirole, 2000. "Customer Poaching and Brand Switching," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 634-657, Winter.
  17. Curtis R. Taylor, 2004. "Consumer Privacy and the Market for Customer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 631-650, Winter.
  18. Jan Bouckaert & Hans Degryse, 2002. "Entry and Strategic Information Display in Credit Markets," CSEF Working Papers 79, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  19. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-29, July.
  20. Biglaiser, Gary & Friedman, James W., 1994. "Middlemen as guarantors of quality," International Journal of Industrial Organization, Elsevier, vol. 12(4), pages 509-531, December.
  21. Gal-Or, Esther, 1984. "Price Dispersion with Uncertain Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 441-57, June.
  22. Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
  23. Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August.
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