Surfing Incognito: Welfare Effects of Anonymous Shopping

24 Pages Posted: 2 Jan 2019

See all articles by Johan N. M. Lagerlöf

Johan N. M. Lagerlöf

University of Copenhagen - Department of Economics

Date Written: November 9, 2018

Abstract

This paper studies consumers’ incentives to hide their purchase histories when the seller’s prices depend on previous behavior. Through distinct channels, hiding both hinders and facilitates trade. Indeed, the social optimum involves hiding to some extent, yet not fully. Two opposing effects determine whether a consumer hides too much or too little: the first-period social gains are only partially internalized, and there is a private (socially irrelevant) second-period gain due to price differences. If time discounting is small, the second effect dominates and there is socially excessive hiding. This result is reversed if discounting is large.

Keywords: behavior-based price discrimination, dynamic pricing, consumer protection, customer recognition, privacy

JEL Classification: D42, D80, L12, L40

Suggested Citation

Lagerlof, Johan N. M., Surfing Incognito: Welfare Effects of Anonymous Shopping (November 9, 2018). Available at SSRN: https://ssrn.com/abstract=3301246 or http://dx.doi.org/10.2139/ssrn.3301246

Johan N. M. Lagerlof (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

HOME PAGE: http://www.johanlagerlof.com/

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