Good Data and Bad Data: The Welfare Effects of Price Discrimination

Maryam Farboodi, Nima Haghpanah and Ali Shourideh

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Abstract: We ask when additional data collection by a monopolist to engage in price discrimination monotonically increases or decreases weighted surplus. To answer this question, we develop a model to study endogenous market segmentation subject to residual uncertainty. We give a complete characterization of when data collection is good or bad for surplus, which consists of a reduction of the problem to one with only two demand curves, and a condition for the two-demand-curves case that highlights three distinct effects of information on welfare. These results provide insights into when data collection and usage for price discrimination should be allowed.

Date: 2025-02
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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