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Third-Degree Price Discrimination in the Age of Big Data

George Charlson

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: A platform holds information on the demographics of its users and wants maximise total surplus. The data generates a probability over which of two products a buyer prefers, with different data segmentations being more or less informative. The platform reveals segmentations of the data to two firms, one popular and one niche, preferring to reveal no information than completely revealing the consumer's type for certain. The platform can improve profits by revealing to both firms a segmentation where the niche firm is relatively popular, but still less popular than the other firm, potentially doing even better by revealing information asymmetrically. The platform has an incentive to provide more granular data in markets in which the niche firm is particularly unpopular or in which broad demographic categories are not particularly revelatory of type, suggesting that the profit associated with big data techniques differs depending on market characteristics.

Keywords: Strategic interaction; network games; interventions; industrial organisation; platforms; hypergraphs (search for similar items in EconPapers)
JEL-codes: D40 L10 L40 (search for similar items in EconPapers)
Date: 2021-08-19
New Economics Papers: this item is included in nep-big, nep-com, nep-gth, nep-ict, nep-ind, nep-isf, nep-mic, nep-net, nep-pay and nep-reg
Note: gc556
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