Online Privacy and Price Discrimination

Vincent Conitzer, Curtis Taylor and Liad Wagman

No 10-79, Working Papers from Duke University, Department of Economics

Abstract: When a firm is able to recognize its previous customers, it may use information about their purchase histories to price discriminate. We analyze a model with a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity and avoid being identified as past customers, possibly at an (exogenous) cost. When consumers can costlessly maintain their anonymity, they all individually choose to do so, which paradoxically results in the highest profit for the firm. Increasing the cost of anonymity can benefit consumers, but only up to a point, after which the effect is reversed.

Keywords: Privacy; anonymity; price discrimination; electronic commerce (search for similar items in EconPapers)
JEL-codes: D8 L1 (search for similar items in EconPapers)
Pages: 34
Date: 2010
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Citations: View citations in EconPapers (4)

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Working Paper: Online Privacy and Price Discrimination (2010)
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