The Curse of Knowledge: Having Access to Customer Information Can Reduce Monopoly Profit

Didier Laussel (), Ngo Long and Joana Resende

CIRANO Working Papers from CIRANO

Abstract: We demonstrate the "curse of knowledge" when a monopolist can recognize different consumer groups through their purchase histories which are influenced by its dynamic pricing policies. Under the Markov-perfect equilibrium, after each commitment period, the firm offers a new introductory price so as to attract new customers. More and more market segments are added gradually. Eventually, the whole market is covered. Shortening the commitment period will result in a fall in profit. In contrast, a full-commitment monopolist would choose to stick to uniform pricing, achieving higher profit. Hence, the firm is better off by refraining from collecting customer information. Nous démontrons la "malédiction du savoir" lorsqu'un monopoleur peut reconnaître différents groupes de consommateurs à travers leurs historiques d'achat influencés par sa politique de prix dynamique. Sous l'équilibre de Markov-parfait, l'entreprise propose, après chaque période d'engagement, un nouveau prix de lancement afin d'attirer de nouveaux clients. De plus en plus de segments de marché sont ajoutés progressivement. Finalement, tout le marché est couvert. La réduction de la période d'engagement entraînera une baisse des bénéfices. En revanche, un monopoleur pleinement engagé choisirait de s'en tenir à un prix unique, réalisant des bénéfices plus élevés. Par conséquent, le monopoleur gagnerait plus de profit s’il pouvait s'engager de ne pas collecter des informations sur les clients.

Keywords: Coasian Dynamics; Information Collection; Monopoly; Regulatory Policies; La dynamique coasienne; La collecte d’infomation; Monopole; Politiques réglementaires (search for similar items in EconPapers)
JEL-codes: L12 L15 (search for similar items in EconPapers)
Date: 2019-03-06
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The curse of knowledge: having access to customer information can reduce monopoly profits (2020)
Working Paper: The curse of knowledge: having access to customer information can reduce monopoly profits (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2019s-04

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