Selling Strategic Information in Digital Competitive Markets

50 Pages Posted: 30 May 2018 Last revised: 14 Oct 2018

Multiple version iconThere are 2 versions of this paper

Date Written: October 9, 2018

Abstract

This paper investigates the strategies of a data broker in selling information to one or to two competing firms that can price-discriminate consumers. The data broker can strategically choose any segment of the consumer demand (information structure) to sell to firms that implement third-degree price discrimination. We show that the equilibrium profits of the data broker are maximized when (1) information identifies the consumers with the highest willingness to pay; (2) consumers with a low willingness to pay remain unidentified; (3) the data broker sells two symmetrical information structures. The data broker therefore strategically sells partial information on consumers in order to soften competition between firms. Extending the baseline model, we prove that these results hold under first-degree price-discrimination.

Keywords: Data broker, Information Structure, Price-discrimination

JEL Classification: D4, D8, L5, D43

Suggested Citation

Bounie, David and Dubus, Antoine and Waelbroeck, Patrick, Selling Strategic Information in Digital Competitive Markets (October 9, 2018). Available at SSRN: https://ssrn.com/abstract=3180277 or http://dx.doi.org/10.2139/ssrn.3180277

David Bounie (Contact Author)

Télécom Paris ( email )

19 Place Marguerite Perey
Palaiseau, 91120
France

Antoine Dubus

Télécom Paris ( email )

19 Place Marguerite Perey
Palaiseau, 91120
France

Patrick Waelbroeck

Télécom Paris ( email )

19 Place Marguerite Perey
Palaiseau, 91120
France

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