Lecture 5 Flashcards
(26 cards)
What are the three main topics of Lecture 5?
1) Price discrimination and consumers’ purchasing strategies, 2) Personalization and price discrimination, 3) Beyond price discrimination.
What is a new risk associated with AI-generated decisions in markets like job or credit markets?
Discrimination based on opaque and potentially irrelevant characteristics.
Why might consumers delay purchases under repeated price discrimination?
They anticipate facing higher prices later, so firms lower initial prices to incentivize early buying.
When might privacy regulation be unnecessary?
If monopolists are better off protecting privacy to maintain sales, regulation is redundant.
What happens when hiding is free in repeat purchases (Conitzer et al., 2012)?
Firms avoid introductory discounts; consumers are worse off due to lost surplus.
What is the consumer outcome when hiding is costly?
Consumers benefit as firms lower initial prices to discourage hiding and encourage early purchases.
At what level of hiding cost is consumer surplus maximized?
At intermediate levels of hiding cost (not free, not prohibitively expensive).
How does hiding affect competition between firms?
It softens competition since firms can’t distinguish loyal from new consumers.
What is dynamic targeted pricing?
A pricing strategy based on past purchases, charging loyal customers more (Chen & Zhang, 2009).
How can voluntary disclosure influence competition?
Depending on the disclosure tech, it can enhance or hinder competition (Ali et al., 2020).
How does product personalization affect a monopolist’s incentive to price discriminate?
It weakens the incentive, as surplus can be extracted from higher uniform prices on personalized goods.
What happens to consumers who hide when product personalization is possible?
They lose the chance to get personalized products, reducing their surplus.
How does personalization affect producer surplus when price discrimination is used?
Increases by λαv̄, where α is the personalization value and v̄ is the hiding threshold.
How does personalization affect producer surplus without price discrimination?
Increases by λ(α − 1/4), assuming α ≥ 1.
Does personalization increase consumer surplus?
Generally yes, as it leads to more valued products and reduced incentive to price discriminate.
How does the impact of personalization compare between discriminatory and uniform pricing?
It has a larger positive impact under uniform pricing.
What makes some markets ‘atypical’ for discrimination analysis?
Goods like jobs or credit are not priced directly and involve subjective, multidimensional criteria.
What is statistical discrimination?
Discrimination based on correlations between observable and unobservable characteristics.
What is taste-based discrimination?
Discrimination based on personal prejudice or dislike, unrelated to job performance.
How can privacy laws reduce taste-based discrimination?
By preventing access to personal traits like religion or sexual orientation.
How can privacy laws increase statistical discrimination?
By removing informative characteristics like criminal records, leading employers to rely more on proxies like race.
What did Acquisti and Fong (2019) find about taste-based discrimination?
Muslim candidates received significantly fewer callbacks than Christians in Republican states based on online profiles.
What did Agan and Starr (2017) find about statistical discrimination?
Banning access to criminal records increased the racial gap in job callbacks from 7% to 43%.
What is the effect of product personalization on price discrimination?
It reduces the incentive to price discriminate and can increase both producer and consumer surplus.
