Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game

Alessandro Iaria, Louis Pape, Christian Helmers, Stefan Wagner and Julian Runge

No 16706, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We use a unique dataset from a mobile puzzle game to investigate the welfare consequences of price discrimination. We rely on experimental variation to characterize player behavior and estimate a model of demand for game content. Our counterfactual simulations show that optimal uniform pricing would increase profit by +340% with respect to the game developer’s observed pricing. This is almost the same as the increase in profit associated with first-degree price discrimination (+347%). All pricing strategies considered—including optimal uniform pricing—would induce a transfer of surplus from players to game developer without, however, generating sizeable dead-weight losses.

Keywords: Price discrimination; Personalized pricing; Mobile apps; Online games; Freemium (search for similar items in EconPapers)
JEL-codes: D40 L11 (search for similar items in EconPapers)
Date: 2021-11
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