The Impact of Access to Consumer Data on the Competitive Effects of Horizontal Mergers
37 Pages Posted: 8 Feb 2016 Last revised: 25 Nov 2016
Date Written: May 9, 2016
The influence of firms’ ability to employ individualized pricing on the welfare consequences of horizontal mergers is examined in location models. In a two-to-one merger, the merger reduces consumer surplus more when firms can price discriminate based on individual preferences compared to when they cannot. However, the opposite holds true in a three-to-two merger, in which the reduction in consumer surplus is substantially lower with individualized pricing than with uniform pricing. Further, the three-to-two merger requires an even lesser marginal cost reduction to justify when an upstream data provider can make exclusive offers for its data to downstream firms.
Keywords: Price Discrimination, Consumer Privacy, Data Broker, Horizontal Merger
JEL Classification: K21, L11, L41
Suggested Citation: Suggested Citation