Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases
39 Pages Posted: 16 Oct 2011
There are 2 versions of this paper
Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases
Hide and Seek: Costly Consumer Privacy in a Market with Repeat Purchases
Date Written: October 15, 2011
Abstract
When a firm can recognize its previous customers, it may use information about their past purchases in order to price discriminate. We study a model with a monopolist and a continuum of heterogeneous consumers, where consumers have the ability to maintain their anonymity and avoid being identified as past customers, possibly at a cost. When consumers can freely maintain their anonymity, they all individually choose to do so, which results in the highest profit for the monopolist. Increasing the cost of anonymity can benefit consumers, but only up to a point, after which the effect is reversed. We show that if the monopolist or an independent third party controls the cost of anonymity, it often works to the detriment of consumers.
Keywords: Anonymity, Customer Recognition, Price Discrimination, Identity Management
JEL Classification: L1, D8
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Conditioning Prices on Purchase History
By Alessandro Acquisti and Hal R. Varian
-
Private Demands and Demands for Privacy: Dynamic Pricing and the Market for Customer Information
-
Supplier Surfing: Competition and Consumer Behavior in Subscription Markets
-
Do Switching Costs Make Markets More or Less Competitive?: The Case of 800-Number Portability
-
Customer Information Sharing Among Rival Firms
By Qihong Liu and Konstantinos Serfes
-
By Kai-lung Hui and Ivan P. L. Png
-
Looking Forward: The Federal Trade Commission and the Future Development of U.S. Competition Policy