DP15729 Search and Price Discrimination Online

Author(s): Eeva Mauring
Publication Date: January 2021
Date Revised: March 2021
Keyword(s): consumer tracking, cookies, GDPR, Imperfect Competition, Online markets, price discrimination, sequential search
JEL(s): D43, D83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15729

I study limited price discrimination based on search costs. "Shoppers" have a zero and "nonshoppers" a positive search cost. A consumer faces a nondiscriminatory "common" price with some probability, or a discriminatory price. In equilibrium, firms mix over the common and the shoppers' discriminatory prices, but set a singleton nonshoppers' discriminatory price. Less likely price discrimination mostly benefits consumers. An individual firm's profit can increase in the number of firms. These results have important implications for regulations that limit price discrimination via reduced tracking (e.g., EU's GDPR, California's CCPA) and for evaluating competition online based on the number of firms.