Customer Information Sharing: Strategic Incentives and New Implications

Journal of Economics and Management Strategy, Forthcoming

NET Institute Working Paper No. 07-27

31 Pages Posted: 19 Oct 2007 Last revised: 2 Aug 2010

See all articles by Byung-Cheol Kim

Byung-Cheol Kim

University of Alabama

Jay Pil Choi

Michigan State University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2007

Abstract

We study oligopolistic firms' incentives to share customer information about past purchase history in a situation where firms are uncertain about whether a particular consumer considers the product offerings complements or substitutes. By addressing this new type of behavior-based price discrimination, we show that both the incentive to share customer information and its effects on consumers depend crucially on the relative magnitudes of the prices that would prevail in the complementary and substitute markets if consumers were fully segmented according to their preferences. This paper has important implications for merger analysis when the primary motive for merger is the acquisition of another firm's customer lists. We also find that the informational regime in which firms reside can have an influence upon the choice of product differentiation. Additionally, our analysis suggests a new role of middlemen as information aggregators.

Keywords: Customer Information Sharing, Complements and Substitutes, Product Differentiation, Behavior-Based Price Discrimination, Merger and Acquisition, Middlemen

JEL Classification: D43, D62, D83, L14, L51, M31

Suggested Citation

Kim, Byung-Cheol and Choi, Jay Pil, Customer Information Sharing: Strategic Incentives and New Implications (September 1, 2007). Journal of Economics and Management Strategy, Forthcoming, NET Institute Working Paper No. 07-27, Available at SSRN: https://ssrn.com/abstract=1022424

Byung-Cheol Kim (Contact Author)

University of Alabama ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
7708462727 (Phone)
7708462727 (Fax)

HOME PAGE: http://https://sites.google.com/site/byungcheolkim76/

Jay Pil Choi

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-353-7281 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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