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Customer Information Sharing Among Rival Firms

33 Pages Posted: 8 Nov 2004  

Qihong Liu

University of Oklahoma - Department of Economics

Konstantinos Serfes

Drexel University - School of Economics

Abstract

The recent rapid growth of the Internet as a medium of communication and commerce, combined with the development of sophisticated software tools, are to a large extent responsible for producing a new kind of information: databases with detailed records about consumers' preferences. These databases have become part of a firm's assets, and as such they can be sold to third parties. This possibility has raised numerous concerns from consumer privacy advocates and regulators, who have entered into a heated debate with business groups and industry associations about whether the practice of customer information sharing should be banned, regulated, or left unchecked. This paper investigates the incentives of rival firms to share their customer-specific information and evaluates the welfare implications if such exchanges are banned, in the context of a perfect price discrimination model.

Keywords: Customer information sharing, horizontal and vertical differentiation, perfect price discrimination

JEL Classification: D43, L13, O30

Suggested Citation

Liu, Qihong and Serfes, Konstantinos, Customer Information Sharing Among Rival Firms. European Economic Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=613021 or http://dx.doi.org/10.2139/ssrn.613021

Qihong Liu (Contact Author)

University of Oklahoma - Department of Economics ( email )

Norman, OK 73019-2103
United States
405-325-5846 (Phone)

HOME PAGE: http://qliu.oucreate.com

Konstantinos Serfes

Drexel University - School of Economics ( email )

3141 Chestnut St.
Philadelphia, PA 19104
United States
215-895-6816 (Phone)
215-571-4670 (Fax)

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