The curse of knowledge: having access to customer information can reduce monopoly profits

Didier Laussel (), Ngo Long and Joana Resende

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Abstract: We show that a monopolist's profit is higher if he refrains from collecting coarse information on his customers, sticking to constant uniform pricing rather than recognizing customers' segments through their purchase history. In the Markov perfect equilibrium with coarse information collection, after each commitment period, a new introductory price is offered to attract new customers, creating a new market segment for price discrimination. Eventually, the whole market is covered. Shortening the commitment period results in lower profits. These results sharply differ from the ones obtained when the firm can uncover the exact willingness-to-pay of each previous customer.

Keywords: price-discrimination (search for similar items in EconPapers)
Date: 2020-09
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02941111
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Citations: View citations in EconPapers (2)

Published in RAND Journal of Economics, 2020, 51 (3), pp.650-675. ⟨10.1111/1756-2171.12336⟩

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Related works:
Journal Article: The curse of knowledge: having access to customer information can reduce monopoly profits (2020)
Working Paper: The Curse of Knowledge: Having Access to Customer Information Can Reduce Monopoly Profit (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02941111

DOI: 10.1111/1756-2171.12336

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