Personalized Pricing and Consumer Privacy

Harold Houba and Evgenia Motchenkova
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Harold Houba: Vrije Universiteit Amsterdam
Evgenia Motchenkova: Vrije Universiteit Amsterdam

No 25-072/VII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Advances in data collection enable firms to use consumer information for personalized pricing. In Clavorà Braulin's (2023) symmetric two-dimensional model, this reduces prices and profits, while partial privacy yields the highest profits. Extending the model to asymmetric firms and vertically differentiated products, we show that these results are not robust under sizable asymmetries. Partial privacy may harm both firm and industry profits, while no privacy can outperform other regimes. Consumer welfare also depends on asymmetry: when large, partial privacy maximizes consumer surplus. These findings challenge prior literature and inform the design of privacy protection regulations.

Keywords: Personalized Prices; Price Discrimination; Consumer Information; Privacy (search for similar items in EconPapers)
JEL-codes: D18 D4 L13 (search for similar items in EconPapers)
Date: 2025-12-11
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