Consumer Scores and Price Discrimination

Alessandro Bonatti and Gonzalo Cisternas

No 20220711, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The consumer suffers because she buys less (with the loss represented by the red area). And while not depicted, she also suffers from future price discrimination due to information about her willingness to pay (that is, the intercept of her demand function) getting transmitted to Firm 2. However, Firm 1 is forced to lower its price (P’ in the figure) after the strategic demand reduction occurs. If the consumer has high willingness to pay, the benefit of this discount applied to many units is such that she wants to be tracked (the blue area—a benefit—grows as the intercept of demand increases).

Keywords: price discrimination; consumer scores; privacy (search for similar items in EconPapers)
JEL-codes: E51 (search for similar items in EconPapers)
Date: 2022-07-11
New Economics Papers: this item is included in nep-dcm and nep-mic
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Related works:
Journal Article: Consumer Scores and Price Discrimination (2020)
Working Paper: Consumer Scores and Price Discrimination (2018)
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