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Price discrimination and product quality under opt-in privacy regulation

Chiara Conti and Pierfrancesco Reverberi

Information Economics and Policy, 2021, vol. 55, issue C

Abstract: We study how an opt-in regime of privacy regulation, which limits the scope for online price discrimination, affects product quality and consumer surplus. When consumers decide to share personal data, they benefit from the complementarity between information and quality, but they pay personalized prices instead of a uniform price. We find that, if the complementarity is strong enough, then product quality is higher with than without the opt-in regime. Privacy regulation may have conflicting effects on consumers with different attitudes towards privacy, and an increase in quality is necessary to improve total consumer surplus. Interestingly, these results hold both under monopoly and imperfect product market competition. We thus recommend that privacy protection measures be grounded in the study of the relation between personal information and product quality.

Keywords: Consumer data; Privacy; Opt-in regime; Price discrimination; Product quality (search for similar items in EconPapers)
JEL-codes: L12 L13 L15 L51 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.infoecopol.2020.100912

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