Voluntary Disclosure and Personalized Pricing

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.

This is a pre-copyedited, author-produced PDF of an article accepted for publication in The Review of Economic Studies following peer review. The version of record "Voluntary Disclosure and Personalized Pricing," The Review of Economic Studies 90, 2 p538-571 (2022) is available online at: https://doi.org/10.1093/restud/rdac033.

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Work Title Voluntary Disclosure and Personalized Pricing
Access
Open Access
Creators
  1. S. Nageeb Ali
  2. Greg Lewis
  3. Shoshana Vasserman
Keyword
  1. Privacy
  2. Disclosure
  3. Segmentation
  4. Unraveling
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. The Review of Economic Studies
Publication Date July 23, 2022
Publisher Identifier (DOI)
  1. https://doi.org/10.1093/restud/rdac033
Deposited February 02, 2024

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Version 1
published

  • Created
  • Updated
  • Added Creator S. Nageeb Ali
  • Added Creator Greg Lewis
  • Added Creator Shoshana Vasserman
  • Added MS29121Manuscript.pdf
  • Updated License Show Changes
    License
    • https://rightsstatements.org/page/InC/1.0/
  • Published
  • Updated Keyword, Publisher, Publisher Identifier (DOI) Show Changes
    Keyword
    • Privacy, Disclosure, Segmentation, Unraveling
    Publisher
    • The Review of Economic Studies
    Publisher Identifier (DOI)
    • 10.1093/restud/rdac033
    • https://doi.org/10.1093/restud/rdac033
  • Updated