Personalized pricing with persuasive advertising and the value of consumer information: a duopoly framework

This paper studies the effects of persuasive advertising and personalized pricing on duopolistic firms' profits, consumer surplus and social welfare when one or two firms adopt consumer information to personalized pricing. With a game-theoretic model, the main results are summarized as follows: (1) The profits of both firms when they use consumer information are lower than those when neither of them use consumer information. (2) Consumer surplus increases with the number of firms who collect and use consumer information. Compared with the case that one or no firms have consumer information, the social welfare in the case that both firms have consumer information is the highest. (3) Given both firms adopt persuasive advertising simultaneously, the two firms will trap into "prisoner's dilemma" when they decide whether to use consumer information or not. (4) In the duopolistic competition, the optimal strategy for data intermediary is to sell information to only one firm.