Winners and losers of gatekeeper-induced consumer preference distortion in promoting personalized pricing by asymmetric firms

Rosa-Branca Esteves () and Nicolas Pasquier ()
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Rosa-Branca Esteves: NIPE/Center for Research in Economics and Management, University of Minho, Portugal
Nicolas Pasquier: Bordeaux School of Economics (BSE) and Grenoble Applied Economics Lab (GAEL)

No 02/2023, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: We present a model of duopoly competition in a marketplace with a Hotelling segment of consumers, where two business users (firms) have access to raw consumer data. The firms can choose between personalized prices (PP), using a costly personalized program device provided by the marketplace, or uniform prices at no additional cost. One firm has a higher level of experience in utilizing consumer data, resulting in a lower cost of price personalization (PP device cost). In order to promote its personalized program device, the marketplace may have an incentive to distort consumer preferences from a uniform to a triangular distribution. Our findings indicate that the marketplace is more likely to distort consumer preferences under specific conditions. This occurs when there is moderate asymmetry in experience between the firms and a high tariff for the program, or when there is weak asymmetry and a moderate program tariff. In these parameter regions, the distortion of consumer preferences negatively impact the profits of the sellers while benefiting the consumers. These insights contribute to a better understanding of the dynamics of digital marketplaces and have implications for policymakers and competition authorities.

Keywords: Competitive price discrimination; Uniform and triangular distribution of consumer preferences; Digital markets, Platform cloud services, European Digital Market Act. (search for similar items in EconPapers)
JEL-codes: D43 D80 L13 L40 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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