Since prices are not personalised, you will also have to pay these high prices, regardless of whether you provide data. Because the seller can present each product to consumers who value it highly, the seller can set a relatively high price for each product. The seller can use data to learn consumers’ tastes, and show each consumer the products he or she likes.
To see this, imagine that a seller commits to not personalise prices, and all consumers except you provide their data. Surprisingly, this seemingly consumer-friendly policy may hurt consumers. When sellers can use data to personalise non-price aspects of their services and create value, they might be better off by committing to not personalise prices. Large online retailers may especially benefit from this strategy, because the crucial part of their business is to match consumers with relevant products. The commitment encourages consumers to provide more data, which enables the seller to display products that are directly relevant to each consumer. To avoid this, the seller can commit to not personalise prices. Such behaviour will lower the quality of data and prevent the seller from not only pricing effectively but also improving its recommendation system and search engine.
For example, they may create new user accounts to see whether they receive lower prices, or go to privacy settings and erase cookies. Then, consumers would try to game the system. To see the first part, imagine that an online seller uses consumer data to personalise prices. Should we worry about personalised pricing? My recent work provides a simple theory that argues the opposite: Sellers have an incentive to avoid personalised pricing, and consumers might worry about the absence of personalised pricing. Consumers and policymakers are concerned that online sellers may use data of consumers to learn about how much they are willing to pay, and then charge different prices to different consumers-so-called personalised pricing. Do you shop online? If so, sellers are likely to know a lot about you: purchase histories, browsing histories, where you live, which operating system you use, and so on.
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