Working Paper: CEPR ID: DP17239
Authors: Shota Ichihashi; Alex Smolin
Abstract: A seller faces a consumer with an uncertain value for the product. The seller has imperfect private information about the value and requests additional data to set the price. The consumer can decline any request. The consumer's willingness to provide data depends on his belief about the seller's type which in turn depends on the request. We show that the type uncertainty limits the scope of data collection: All equilibrium payoffs are spanned by fully pooling equilibria in which the seller collects the same data regardless of the type. The seller's private information lowers efficiency and profits, but benefits the consumer by fueling his skepticism and preventing excessive data collection. Having less private information may enable the seller to collect more data directly from the consumer and may lower the overall consumer welfare.
Keywords: consumer privacy; data collection; information design; mechanism design; price discrimination
JEL Codes: D42; D82; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Seller's private information (Y70) | Consumer's willingness to provide data (D16) |
| Consumer's willingness to provide data (D16) | Pricing strategies (D49) |
| Seller's private information (Y70) | Pricing strategies (D49) |
| Seller's private information (Y70) | Overall welfare (I31) |
| Type uncertainty (D89) | Data collection (C80) |
| Type uncertainty (D89) | Pooling equilibria (D50) |
| Consumer's right to decline data requests (D18) | Consumer welfare (D69) |
| Seller's commitment not to collect extraneous information (L14) | Future data collection opportunities (C81) |
| Seller's private information (Y70) | Consumer payoffs (D19) |
| Seller's private information (Y70) | Efficiency (D61) |
| Seller's private information (Y70) | Profits (D33) |