Working Paper: CEPR ID: DP12936
Authors: Renato Gomes; Alessandro Pavan
Abstract: We investigate the effects on targeting and welfare of uniform pricing (be it explicitly mandated, induced by privacy regulations, or the result of the transition from a centralized to a decentralized market structure). We build a model of many-to-many matching in which preferences are both vertically and horizontally differentiated. In the absence of uniform-price obligations, platforms maximize profits through price customization, using information on local elasticities. We show how uniform pricing may either increase or decrease targeting, and identify conditions under which it is beneficial to consumer surplus. The analysis has implications for online retailing, ad exchanges, and media markets
Keywords: many-to-many matching; asymmetric information; platforms; incentives; price discrimination
JEL Codes: D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| uniform pricing (D41) | targeting (L21) |
| uniform pricing (D41) | consumer surplus (D46) |
| uniform pricing (D41) | equilibrium level of targeting (E61) |
| match-demand elasticities vary with location (R22) | targeting (L21) |