TY - JOUR
T1 - Voluntary Disclosure and Personalized Pricing
AU - Ali, S. Nageeb
AU - Lewis, Greg
AU - Vasserman, Shoshana
N1 - Publisher Copyright:
© The Author(s) 2022. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.
PY - 2023/3/1
Y1 - 2023/3/1
N2 - Firms have ever-increasing access to consumer data, which they use to personalize their advertising and to price discriminate. This raises privacy concerns. Policymakers have argued in response that consumers should be given control over their data, able to choose what to share and when. Since firms learn about a consumer’s preferences both from what they do and do not disclose, the equilibrium implications of consumer control are unclear. We study whether such measures improve consumer welfare in monopolistic and in competitive markets. We find that consumer control can improve consumer welfare relative to both perfect price discrimination and uniform pricing. First, consumers can use disclosure to amplify competitive forces. Second, consumers can disclose information to induce even a monopolist to lower prices. Whether consumer control improves welfare depends on the disclosure technology and market competitiveness. Simple disclosure technologies suffice in competitive markets. When facing a monopolist, a consumer needs partial disclosure possibilities to obtain any welfare gains.
AB - Firms have ever-increasing access to consumer data, which they use to personalize their advertising and to price discriminate. This raises privacy concerns. Policymakers have argued in response that consumers should be given control over their data, able to choose what to share and when. Since firms learn about a consumer’s preferences both from what they do and do not disclose, the equilibrium implications of consumer control are unclear. We study whether such measures improve consumer welfare in monopolistic and in competitive markets. We find that consumer control can improve consumer welfare relative to both perfect price discrimination and uniform pricing. First, consumers can use disclosure to amplify competitive forces. Second, consumers can disclose information to induce even a monopolist to lower prices. Whether consumer control improves welfare depends on the disclosure technology and market competitiveness. Simple disclosure technologies suffice in competitive markets. When facing a monopolist, a consumer needs partial disclosure possibilities to obtain any welfare gains.
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U2 - 10.1093/restud/rdac033
DO - 10.1093/restud/rdac033
M3 - Article
AN - SCOPUS:85172020707
SN - 0034-6527
VL - 90
SP - 538
EP - 571
JO - Review of Economic Studies
JF - Review of Economic Studies
IS - 2
ER -