Discussion Paper Details

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Title: Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game

Author(s): Christian Helmers, Alessandro Iaria, Louis Pape, Julian Runge and Stefan Wagner

Publication Date: November 2021

Keyword(s): freemium, mobile apps, online games, personalized pricing and price discrimination

Programme Area(s): Industrial Organization

Abstract: We use a unique dataset from a mobile puzzle game to investigate the welfare consequences of price discrimination. We rely on experimental variation to characterize player behavior and estimate a model of demand for game content. Our counterfactual simulations show that optimal uniform pricing would increase profit by +340% with respect to the game developer's observed pricing. This is almost the same as the increase in profit associated with first-degree price discrimination (+347%). All pricing strategies considered-including optimal uniform pricing-would induce a transfer of surplus from players to game developer without, however, generating sizeable dead-weight losses.

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Bibliographic Reference

Helmers, C, Iaria, A, Pape, L, Runge, J and Wagner, S. 2021. 'Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game'. London, Centre for Economic Policy Research.