Consumer Scores and Price Discrimination

Alessandro Bonatti and Gonzalo Cisternas

No 13004, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A long-lived consumer interacts with a sequence of firms in a stationary Gaussian setting. Each firm relies on the consumer's current score--an aggregate measure of past quantity signals discounted exponentially--to learn about her preferences and to set prices. In the unique stationary linear Markov equilibrium, the consumer reduces her demand to drive average prices below the no-information benchmark. The firms' learning is maximized by persistent scores, i.e., scores that overweigh past information relative to Bayes' rule when observing disaggregated data. Hidden scores--those only observed by firms--reduce demand sensitivity, increase expected prices, and reduce expected quantities.

Keywords: Price discrimination; Information design; Consumer scores; Signaling; Ratchet effect; Persistence; transparency (search for similar items in EconPapers)
JEL-codes: C73 D82 D83 (search for similar items in EconPapers)
Date: 2018-06
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 (7)

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Related works:
Working Paper: Consumer Scores and Price Discrimination (2022)
Journal Article: Consumer Scores and Price Discrimination (2020)
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