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Discussion Paper

Consumer Scores and Price Discrimination

Abstract: The consumer suffers because she buys less (with the loss represented by the red area). And while not depicted, she also suffers from future price discrimination due to information about her willingness to pay (that is, the intercept of her demand function) getting transmitted to Firm 2. However, Firm 1 is forced to lower its price (P’ in the figure) after the strategic demand reduction occurs. If the consumer has high willingness to pay, the benefit of this discount applied to many units is such that she wants to be tracked (the blue area—a benefit—grows as the intercept of demand increases).

Keywords: price discrimination; consumer scores; privacy;

JEL Classification: E51;

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Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2022-07-11

Number: 20220711