Approximating Purchase Propensities and Reservation Prices from Broad Consumer Tracking

24 Pages Posted: 30 Oct 2020

See all articles by Benjamin Shiller

Benjamin Shiller

Brandeis University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2020

Abstract

A consumer's web‐browsing history, now readily available, may be much more useful than demographics for both targeting advertisements and personalizing prices. Using a method that combines economic modeling and machine learning methods, I find a striking difference. Personalizing prices based on web‐browsing histories increases profits by 12.99%. Using demographics alone to personalize prices raises profits by only 0.25%, suggesting the percent profit gain from personalized pricing has increased 50‐fold. I then investigate whether regulations intended to prevent price gouging increase aggregate consumer surplus. Two feasible regulations considered offer at best modest improvements.

Suggested Citation

Shiller, Benjamin, Approximating Purchase Propensities and Reservation Prices from Broad Consumer Tracking (May 2020). International Economic Review, Vol. 61, Issue 2, pp. 847-870, 2020, Available at SSRN: https://ssrn.com/abstract=3721379 or http://dx.doi.org/10.1111/iere.12442

Benjamin Shiller (Contact Author)

Brandeis University - Department of Economics ( email )

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