Competitive Imperfect Price Discrimination and Market Power

49 Pages Posted: 6 Dec 2019

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Wing Man Wynne Lam

University of East Anglia (UEA) - Norwich Business School

Wouter Vergote

Facultés Universitaires Saint Louis à Bruxelles - CEREC; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Date Written: 2019

Abstract

Two duopolists compete in price on the market for a homogeneous product. They can 'profile' consumers, i.e., identify their valuations with some probability. If both firms can profile consumers but with different abilities, then they achieve positive expected profits at equilibrium. This provides a rationale for firms to (partially and unequally) share data about consumers, or for data brokers to sell different customer analytics to competing firms. Consumers prefer that both firms profile exactly the same set of consumers, or that only one firm profiles consumers, as this entails marginal cost pricing (so does a policy requiring list prices to be public). Otherwise, more protective privacy regulations have ambiguous effects on consumer surplus.

Keywords: price discrimination, price dispersion, Bertrand competition, privacy, big data

JEL Classification: D110, D180, L120, L860

Suggested Citation

Belleflamme, Paul and Wynne Lam, Wing Man and Vergote, Wouter, Competitive Imperfect Price Discrimination and Market Power (2019). CESifo Working Paper No. 7964. Available at SSRN: https://ssrn.com/abstract=3498721

Paul Belleflamme (Contact Author)

CORE and Louvain School of Management, UCL (Université Catholique de Louvain) ( email )

34 Voie du Roman Pays
POBox L1.03.01
B-1348 Louvain-la-Neuve, B-1348
Belgium
+32 10 47 82 91 (Phone)
+32 10 47 43 01 (Fax)

HOME PAGE: http://perso.uclouvain.be/paul.belleflamme/Site/Home.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Wing Man Wynne Lam

University of East Anglia (UEA) - Norwich Business School ( email )

Norwich
NR4 7TJ
United Kingdom

Wouter Vergote

Facultés Universitaires Saint Louis à Bruxelles - CEREC ( email )

Brussels, 1000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
23
Abstract Views
102
PlumX Metrics