Competitive Imperfect Price Discrimination and Market Power

Paul Belleflamme, Wynne Lam, Wouter Vergote

Research output: Contribution to journalArticle

3 Citations (Scopus)
31 Downloads (Pure)

Abstract

Two duopolists compete on price in the market for a homogeneous product. They can “profile” consumers, that is, identify their valuations with some probability. If both firms can profile consumers but with different abilities, then they achieve positive expected profits at equilibrium. This provides a rationale for firms to (partially and unequally) share data about consumers or for data brokers to sell different customer analytics to competing firms. Consumers prefer that both firms profile exactly the same set of consumers or that only one firm profiles consumers as this entails marginal cost pricing (so does a policy requiring list prices to be public). Otherwise, more protective privacy regulations have ambiguous effects on consumer surplus.
Original languageEnglish
Pages (from-to)996–1015
Number of pages20
JournalMarketing Science
Volume39
Issue number5
Early online date6 Jul 2020
DOIs
Publication statusPublished - Sep 2020

Keywords

  • Bertrand competition
  • Big data
  • Price discrimination
  • Price dispersion
  • Privacy

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