Title: Personalized pricing in the presence of privacy concerns

Speaker: Chen Zhiqi, Chancellor's Professor of the Department of Economics, Carleton University, Canada. His main research fields are industrial organization theory and international trade. His research results have been published in international renowned academic journals such as American Economic Review, The RAND Journal of Economics, International Economic Review, The Economic Journal, International Journal of Industrial Organization, Canadian Journal of Economics, Journal of Industrial Economics, Economic Inquiry, Journal of Economic Dynamics and Control and Journal of Economics and Management Strategy.

Abstract: We study firms' incentives to adopt a tracking technology to collect personal data that enable personalized pricing in an online market where some consumers have innate desires for privacy. In a model where two differentiated goods are sold under two different market structures, we find that the presence of these privacy-sensitive consumers alters the firms’ incentive to adopt personalized pricing. In particular, no firm uses personalized pricing in equilibrium if the proportion of privacy-sensitive consumers in the market is sufficiently high. Increased competition, however, leads to wider use of personalized pricing by firms. Privacy regulation that gives consumers control over whether a firm is allowed to track their online activities has the intended impact of protecting consumer privacy only if the proportion of privacy-sensitive consumers is small. Otherwise, the privacy regulation makes the use of tracking technology more widespread. In a monopoly market, this expanded use of the tracking technology reduces consumer welfare and social welfare. In a duopoly market, however, its impact on consumer and social welfare is more nuanced. While competition in a duopoly market ensures that the regulation raises consumer welfare, the wider use of the tracking technology may cause welfare losses.

Date & time: 23 June 2025, 10:00 - 11:30

Venue: B321, Zhixin Building, Central Campus, Shandong University