Online Privacy and Price Discrimination

35 Pages Posted: 22 Oct 2010

See all articles by Curtis R. Taylor

Curtis R. Taylor

Duke University - Department of Economics

Vincent Conitzer

Duke University

Liad Wagman

Duke University

Date Written: July 2010

Abstract

When a firm is able to recognize its previous customers, it may use information about their purchase histories to price discriminate. We analyze a model with a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity and avoid being identified as past customers, possibly at an (exogenous) cost. When consumers can costlessly maintain their anonymity, they all individually choose to do so, which paradoxically results in the highest profit for the firm. Increasing the cost of anonymity can benefit consumers, but only up to a point, after which the effect is reversed.

Keywords: Privacy, anonymity, price discrimination, electronic commerce

JEL Classification: L1, D8

Suggested Citation

Taylor, Curtis R. and Conitzer, Vincent and Wagman, Liad, Online Privacy and Price Discrimination (July 2010). Economic Research Initiatives at Duke Working Paper No. 79. Available at SSRN: https://ssrn.com/abstract=1695143 or http://dx.doi.org/10.2139/ssrn.1695143

Curtis R. Taylor (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
919-660-1827 (Phone)
919-684-8974 (Fax)

Vincent Conitzer

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Liad Wagman

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

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