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Discussion Paper Details

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Title: Mobility with private information and privacy suppression

Author(s): Saara H�m�l�inen and Vaiva Petrikaite

Publication Date: April 2018

Keyword(s): Changing tastes, directed search, Experience Goods, mobility, Privacy suppression and private information

Programme Area(s): Industrial Organization and Labour Economics

Abstract: We consider a problem of matching guests with suitable hosts in a dynamic, directed search market in which a visitor's private taste and plans are subject to change. Guests learn about hosts by visiting them personally, which reveals whether the destination merits a repeat visit. Hosts prefer to target guests with high willingness to pay but, assuming full privacy, cannot tell whether they should rely on previous visitors or hold a sale to attract new visitors. We find that guests' private learning reduces matching frictions by sustaining longer visits to particularly fitting destinations. The strength of this effect depends on competition intensity. We also discover that a ban of tracking and targeting technologies may reduce consumer surplus. Specifically, access to visitor data enables their earlier hosts to respond more rapidly to demand changes, which can intensify competition and put downward pressure on prices.

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Bibliographic Reference

H�m�l�inen, S and Petrikaite, V. 2018. 'Mobility with private information and privacy suppression'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12860