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Media type:
Report;
E-Book
Title:
Optimal non-linear pricing with data-sensitive consumers
Contributor:
Krähmer, Daniel
[Author];
Strausz, Roland
[Author]
Published:
München und Berlin: Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, 2022
Footnote:
Diese Datenquelle enthält auch Bestandsnachweise, die nicht zu einem Volltext führen.
Description:
We introduce consumers with intrinsic privacy preferences into the monopolistic non-linear pricing model. Next to classical consumers, there is a share of data-sensitive consumers who incur a privacy cost if their purchase reveals information to the monopolist. The monopolist discriminates between privacy types using privacy mechanisms which consist of a direct mechanism and a privacy option, targeting, respectively, classical and data-sensitive consumers. We show that a privacy mechanism is optimal if privacy costs are large and that it yields classical consumers a higher utility than data-sensitive consumers with the same valuation. If, by contrast, privacy preferences are public information, data-sensitive consumers with a low valuation obtain a strictly higher utility than classical consumers. With public privacy preferences, data-sensitive consumers and the monopolist are better off, whereas classical consumers are worse off. Our results are relevant for policy measures that target the data-awareness of consumers, such as the European GDPR.