Competitive Imperfect Price Discrimination and Market Power

Paul Belleflamme, Wing Man Wynne Lam and Wouter Vergote

No 7964, CESifo Working Paper Series from CESifo

Abstract: Two duopolists compete in price on the market for a homogeneous product. They can ‘profile’ consumers, i.e., identify their valuations with some probability. If both firms can profile consumers but with different abilities, then they achieve positive expected profits at equilibrium. This provides a rationale for firms to (partially and unequally) share data about consumers, or for data brokers to sell different customer analytics to competing firms. Consumers prefer that both firms profile exactly the same set of consumers, or that only one firm profiles consumers, as this entails marginal cost pricing (so does a policy requiring list prices to be public). Otherwise, more protective privacy regulations have ambiguous effects on consumer surplus.

Keywords: price discrimination; price dispersion; Bertrand competition; privacy; big data (search for similar items in EconPapers)
JEL-codes: D11 D18 L12 L86 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-big, nep-com, nep-cta, nep-ind, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Competitive Imperfect Price Discrimination and Market Power (2020)
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