Softening Competition through Unilateral Sharing of Customer Data

Chongwoo Choe, Jiajia Cong () and Chengsi Wang
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Jiajia Cong: School of Management, Fudan University

No 2021-10, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: We study how a data-rich firm can benefit by unilaterally sharing its customer data with a data-poor competitor when the data can be used for price discrimination. By sharing data on the segment of market that is more loyal to the competitor while keeping the data on the competitor's most loyal segment to itself, the firm can induce the competitor to raise its price for consumers it does not have data on. Such data sharing is an example of a fat-cat strategy as it softens price competition that follows data sharing. Although consumer surplus decreases as a result of data sharing, total surplus can increase when the sharing firm concedes its market share to the competitor, which improves the quality of consumer-firm matching.

Keywords: customer data sharing; price discrimination (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-big, nep-com, nep-gth, nep-ind and nep-reg
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Citations: View citations in EconPapers (1)

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Journal Article: Softening Competition Through Unilateral Sharing of Customer Data (2024)
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