Consumer foresight,customer data,and investment in targeting technology |
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| Authors: | Irina Baye Geza Sapi |
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| Institution: | 1. DICE, University of Duesseldorf, Duesseldorf, Germany;2. European Commission DG COMP - Chief Economist Team and DICE, University of Duesseldorf, Duesseldorf, Germany
The views expressed in this article are solely those of the authors and may not, under any circumstances, be regarded as representing an official position of the European Commission. |
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| Abstract: | We analyze competing firms’ incentives to adopt a technology that allows making refined targeted offers to returning customers. Consumer foresight is crucial for firms’ decisions. Although our setup is symmetric, when consumers are myopic, the unique equilibrium is asymmetric in firms’ technology adoption decisions. Contrary to conventional wisdom, consumers may be better off being myopic than sophisticated. Light privacy policy may benefit consumers if it reduces the costs of handling customer data and avoids strict obligations on firms to inform consumers about data use, which would erode investment incentives into targeting technology. |
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| Keywords: | consumer myopia customer data price discrimination technology adoption |
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