Citation

Discussion Paper Details

Please find the details for DP13004 in an easy to copy and paste format below:

Full Details

Title: Consumer Scores and Price Discrimination

Author(s): Alessandro Bonatti and Gonzalo Cisternas

Publication Date: June 2018

Keyword(s): Consumer Scores, information design, Persistence, price discrimination, Ratchet Effect, signaling and transparency

Programme Area(s): Industrial Organization

Abstract: A long-lived consumer interacts with a sequence of firms in a stationary Gaussian setting. Each firm relies on the consumer's current score--an aggregate measure of past quantity signals discounted exponentially--to learn about her preferences and to set prices. In the unique stationary linear Markov equilibrium, the consumer reduces her demand to drive average prices below the no-information benchmark. The firms' learning is maximized by persistent scores, i.e., scores that overweigh past information relative to Bayes' rule when observing disaggregated data. Hidden scores--those only observed by firms--reduce demand sensitivity, increase expected prices, and reduce expected quantities.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13004

Bibliographic Reference

Bonatti, A and Cisternas, G. 2018. 'Consumer Scores and Price Discrimination'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13004