TRACKING CUSTOMER SEARCH TO PRICE DISCRIMINATE

• Published in: Economic inquiry Vol. 44; no. 2; pp. 280 - 295
• Main Authors: DECK, CARY A., WILSON, BART J.
• Format: Journal Article
• Language: English
• Published: Oxford, UK Blackwell Publishing Ltd 01-04-2006; Blackwell Publishers Ltd; Western Economic Association
• Subjects: College students; Consumers; Customers; Electronic commerce; Electronics; Experiments; Hard disks; Internet; Laboratories; Marketing; Price discrimination; Price theory; Prices; Pricing policies; Purchasing; Shopping malls; Studies; Surveys; Technology; Technology application; Websites; United States; United States > US
• ISSN: 0095-2583; 1465-7295
• DOI: 10.1093/ei/cbj014

The electronic technologies of the Internet make it possible for sellers to track potential customers and discriminate between the informed and uninformed. In this article, we report an experiment that investigates the market impact of firms tracking customers and offering discriminatory prices based on search history. We find that consumers, on average, face the same prices when sellers have the ability to track customers and price discriminate as when sellers post a single price for all buyers. However, informed buyers receive lower prices when sellers can detect buyer search, whereas uninformed buyers receive lower prices when firms cannot track customers. (JEL D43, L13, C92)