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Surfing Incognito: Welfare Effects of Anonymous Shopping

Johan Lagerlof ()

No 18-13, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper studies consumers’ incentives to hide their purchase histories when the seller’s prices depend on previous behavior. Through distinct channels, hiding both hinders and facilitates trade. Indeed, the social optimum involves hiding to some extent, yet not fully. Two opposing effects determine whether a consumer hides too much or too little: the first-period social gains are only partially internalized, and there is a private (socially irrelevant) second-period gain due to price differences. If time discounting is small, the second effect dominates and there is socially excessive hiding. This result is reversed if discounting is large.

Keywords: behavior-based price discrimination; dynamic pricing; consumer protection; customer recognition; privacy (search for similar items in EconPapers)
JEL-codes: D42 D80 L12 L40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
Date: 2018-12-03
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