The curse of knowledge: having access to customer information can reduce monopoly profits

• Type: Article in International Scientific Journal
• Date: 2020

Authors

Laussel, D (Author) Other; Long, NV (Author) Other; Joana Resende (Author) FEP

Journal

Title: RAND Journal of Economics

Vol. 51

Pages: 650-675

ISSN: 0741-6261

Publisher: Wiley-Blackwell

Indexing

ISI Web of Knowledge - 9 Citations

Scopus - 8 Citations

Other information

Authenticus ID: P-00S-KZN

DOI: 10.1111/1756-2171.12336

Abstract (EN): We show that a monopolist's profit is higher if he refrains from collecting coarse information on his customers, sticking to constant uniform pricing rather than recognizing customers' segments through their purchase history. In the Markov perfect equilibrium with coarse information collection, after each commitment period, a new introductory price is offered to attract new customers, creating a new market segment for price discrimination. Eventually, the whole market is covered. Shortening the commitment period results in lower profits. These results sharply differ from the ones obtained when the firm can uncover the exact willingness-to-pay of each previous customer.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 26