Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game

96 Pages Posted: 9 Nov 2021

See all articles by Christian Helmers

Christian Helmers

Santa Clara University

Alessandro Iaria

University of Bristol

Louis-Daniel Pape

Télécom Paris

Stefan Wagner

ESMT Berlin

Julian Runge

RWTH Aachen University

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Date Written: November 1, 2021

Abstract

We use a unique dataset from a mobile puzzle game to investigate the welfare consequences of price discrimination. We rely on experimental variation to characterize player behavior and estimate a model of demand for game content. Our counterfactual simulations show that optimal uniform pricing would increase profit by +340% with respect to the game developer's observed pricing. This is almost the same as the increase in profit associated with first-degree price discrimination (+347%). All pricing strategies considered-including optimal uniform pricing-would induce a transfer of surplus from players to game developer without, however, generating sizeable dead-weight losses.

Keywords: freemium, mobile apps, online games, personalized pricing, price discrimination

JEL Classification: D40, L11

Suggested Citation

Helmers, Christian and Iaria, Alessandro and Pape, Louis-Daniel and Wagner, Stefan and Runge, Julian, Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game (November 1, 2021). CEPR Discussion Paper No. DP16706, Available at SSRN: https://ssrn.com/abstract=3960310

Christian Helmers (Contact Author)

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Alessandro Iaria

University of Bristol ( email )

12A Priory Road
Bristol, Avon BS8 1TB
United Kingdom
BS8 2EW (Fax)

Louis-Daniel Pape

Télécom Paris ( email )

19, Place Marguerite Perey
Palaiseau, 91120
France

Stefan Wagner

ESMT Berlin ( email )

Schlossplatz 1
Berlin, Berlin 10178
Germany

Julian Runge

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

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