DP13686 Consumer Privacy and Serial Monopoly

Author(s): Venkataraman Bhaskar, Nikita Roketskiy
Publication Date: April 2019
Keyword(s): consumer privacy, dynamic demand, endogenous screening, Nonlinear Pricing
JEL(s): D11, D43, L13
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13686

We examine the implications of consumer privacy when preferences today depend upon past consumption choices, and consumers shop from different sellers in each period. Although consumers are ex ante identical, their initial consumption choices cannot be deterministic. Thus ex post heterogeneity in preferences arises endogenously. Consumer privacy improves social welfare, consumer surplus and the profits of the second-period seller, while reducing the profits of the first period seller, relative to the situation where consumption choices are observed by the later seller.