Selling Cookies

50 Pages Posted: 19 Oct 2013

See all articles by Dirk Bergemann

Dirk Bergemann

Yale University - Cowles Foundation - Department of Economics; Yale University - Cowles Foundation

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: October 18, 2013

Abstract

We develop a model of data pricing and targeted advertising. A monopolistic data provider determines the price to access "cookies," i.e., informative signals about individual consumers' preferences. The demand for information is generated by advertisers who seek to tailor their spending to the value of each consumer. We characterize the set of consumers targeted by the advertisers and the optimal monopoly price of cookies. The ability to influence the composition of the set of targeted consumers provides incentives to lower prices. Thus, the monopoly price of data is decreasing in the reach of the database and increasing in the number of competing sellers of exclusive data. Finally, we explore the implications of nonlinear pricing of information and characterize the exclusive data sales that emerge as part of the optimal mechanism.

Keywords: Data providers, Information sales, Targeting, Online advertising, Media markets

JEL Classification: D44, D82, D83

Suggested Citation

Bergemann, Dirk and Bonatti, Alessandro, Selling Cookies (October 18, 2013). Cowles Foundation Discussion Paper No. 1920. Available at SSRN: https://ssrn.com/abstract=2342164 or http://dx.doi.org/10.2139/ssrn.2342164

Dirk Bergemann (Contact Author)

Yale University - Cowles Foundation - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
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203-432-3592 (Phone)
203-432-2128 (Fax)

HOME PAGE: http://www.econ.yale.edu/~dirk/

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Alessandro Bonatti

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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