price discrimination


In the course of our policy work related to big data, we discussed first-degree price discrimination: At a more abstract level, the problem is one of first-degree price discrimination. First-degree price discrimination, or person-specific pricing, has not been practiced or observed because it was not possible to discern reservation values. This constraint may be in the process of being overcome now that capabilities exist to analyze individual behavior as recorded in multiple transaction-generated data sets (Shiller, 2014). Big data and electronic commerce have reduced the costs of targeting and first-degree price discrimination. It is argued that the increased availability of behavioral data may encourage a shift from third-degree price discrimination towards personalized pricing (Executive Office of the President of the United States, 2015).