The Curse of Knowledge: Having Access to Customer Information Can be Detrimental to Monopoly’s Profit

Didier Laussel (), Ngo Long and Joana Resende

No HIAS-E-93, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

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: curse of knowledge; customers information; intertemporal price discrimination; Coase conjecture; price personalization (search for similar items in EconPapers)
JEL-codes: L12 L15 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2019-12
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-93

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