Harmonic price targeting

Daniel Garcia

Information Economics and Policy, 2022, vol. 60, issue C

Abstract: This paper studies third-degree price discrimination in a classical model of price competition with differentiated products. Firms charge different prices to different consumers, based on their estimate of their price sensitivity. If the market is fully covered and information is symmetric, more accurate information has a pure redistributive effect, leading to higher profits but lower consumer welfare. If the market is not covered, information always benefit firms but the welfare effects are ambiguous. If information is asymmetric, firms benefit from more information, but less so than in the symmetric case, and total welfare depends on the extent of this asymmetry. I conclude that firms have strong incentives to share information about consumer tastes.

Keywords: Price targeting; Privacy; Competition (search for similar items in EconPapers)
JEL-codes: D11 D83 L13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:60:y:2022:i:c:s0167624522000233

DOI: 10.1016/j.infoecopol.2022.100984

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