Working Paper: CEPR ID: DP17907
Authors: Eeva Mauring; Cole Williams
Abstract: Consumer-tracking technology offers new tools for price discrimination in digital markets. We examine the impact of sellers using this technology to adjust prices according to a buyer’s prior search length in a competitive search market where buyers differ in patience. We find "Coasian equilibria" wherein sellers reduce prices for buyers with longer search lengths which in turn requires them to reduce prices for buyers with shorter search lengths. In commonly studied environments, Coasian equilibria not only yield higher welfare for every buyer than all uniform-pricing equilibria, but are also the only equilibria when some mass of buyers are arbitrarily patient.
Keywords: Coase Conjecture; Sequential Search; Price Discrimination
JEL Codes: D43; D83; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| longer search lengths (C41) | lower prices (P22) |
| lower prices (P22) | higher welfare for buyers (D69) |
| longer search lengths (C41) | higher welfare for buyers (D69) |
| price discrimination based on search length (D40) | higher welfare for buyers (D69) |
| competitive search market (L13) | price discrimination based on search length (D40) |
| buyer patience (G31) | price discrimination based on search length (D40) |