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Home /Background /Increasing Price Discrimination

Big Data Increases Price Discrimination

The question is what do online advertisers get for their money?  No doubt, user profiling helps advertisers more effectively identify the customers most likely to be interested in their products.  However, the darker explanation is that such profiling also facilitates tailoring prices to individual consumers in ways that maximize revenue extracted from each transaction.  

This ability to charge different prices to different customers for the same good or service, what economists call “price discrimination”, is based on the reality that people have different maximum prices they are willing to pay.   And profiling consumers helps advertisers identify this “pain point” for each customer and offer a different price to each customer matching that maximum price they are willing to pay without them knowing that other deals are available.[i] Some economists argue that where consumers know all pricing options, they can potentially benefit from price discrimination, as when airline passengers choose between a cheap price at an inconvenient time to save money, which can fill seats, increase revenues for airlines and increase options for different customers.[ii]  But when people either don’t know about better deals or don’t easily have the ability to access them, such price discrimination is far more likely to hurt consumers.

  • Read more about Big Data Increases Price Discrimination

News Clips

  • Jamie Rapperport . Use Behavioral Insights to Develop Better In-Store Promotions, DataInformed, 03/23/2015.
  • Teddy Nykiel . Banks Mine Big Data to Get to Know You Better, and Better, NerdWallet, 03/06/2015.
  • Adam Tanner. Different Customers, Different Prices, Thanks To Big Data, Forbes, 04/14/2014.
  • Jennifer Valentino-Devries, Jeremy Singer-Vine, and Ashkan Soltani. Websites Vary Prices, Deals Based on Users, Wall Street Journal, 12/23/2012.
  • Jay Greene. Feds shut down high-tech mortgage scammers, CBSNews.com, 11/16/2011.
  • John Brockman. The Local-Global Flip, or, "The Lanier Effect", Edge, 08/29/2011.
  • Thomas Catan and Amir Efrati. New Heat for Google CEO: U.S. Says Google's Larry Page Knew About Improper Online Pharmacy Ads, Wall Street Journal, 08/27/2011.
  • Stephanie Clifford. Web Coupons Know Lots About You, and They Tell, New York Times, 04/16/2010.
  • Karen Blumenthal. How Banks, Marketers Aid Scams, Wall Street Journal, 07/15/2009.
  • Jeff Chester. Role of Interactive Advertising & the Subprime Scandal: Another wake-up call for FTC, Digital Destiny, 08/28/2007.
View All Recent News Clips

Related Opinion

  • Is Apple the digital "Trojan Horse" that enables greater data collection? Its use of "behavioral targeting", CDD Digital Destiny, 09/19/2014.
  • Seeta Peña Gangadharan. The Dangers of High-Tech Profiling, Using Big Data, New York Times, 08/07/2014.
  • Nathan Newman. Taking on Google's Monopoly Means Regulating Its Control of User Data, Huffington Post, 09/24/2013.
  • Robert X. Cringely. Google’s Pound of Flesh, I, Cringely on Technology, 09/27/2010.
  • Faisal Laljee. Subprime Mortgage Bust Could Create Ad Trouble for Google, Seeking Alpha, 02/22/2007.

Related Policy Reports

  • Big Data and Differential Pricing, White House, 02/01/2015.
  • Alex Rosenblat, Rob Randhava, Danah Boyd, Seeta Peña Gangadharan, and Corrine Yu. Data & Civil Rights: Consumer Finance Primer, Data & Society/OTI/Leadership Conference, 10/30/2014.
  • Comment: Big Data: A Tool for Inclusion or Exclusion? , U.S. PIRG Education Fund and Center for Digital Democracy, 10/29/2014.
  • Comment: Regarding the Use of Mobile Financial Services by Consumers and Its Potential for Improving the Financial Lives of Economically Vulnerable Consumers, U.S. PIRG and Center for Digital Democracy, 09/10/2014.
  • Protecting Consumer Privacy and Welfare in the Era of “E-Scores,” Real-time BigData “Lead-Generation” Practices and other Scoring/Profile Applications, Center for Digital Democracy and U.S. PIRG, 03/18/2014.
  • Civil Rights Principles for the Era of Big Data, Multiple organizations, 02/27/2014.
  • Liars and Loans: How Deceptive Advertisers Use Google, Consumer Watchdog’s Inside Google Report, 02/21/2011.
  • A Review of the Data Broker Industry: Collection, Use, and Sale of Consumer Data for Marketing Purposes, U.S. Senate Committee on Commerce, Science and Transportation, 12/18/2003.

Related Academic Analysis

  • Nathan Newman. The Costs of Lost Privacy: Consumer Harm and Rising Economic Inequality in the Age of Google, William Mitchell Law Review, 03/01/2014.
  • Ed Mierzwinski & Jeff Chester. Selling Consumers Not Lists: The New World of Digital Decision-Making and the Role of the Fair Credit Reporting Act, Suffolk Law Review, 12/01/2013.
  • Benjamin Reed Shiller. First Degree Price Discrimination Using Big Data, Working Paper, 08/20/2013.
  • Ryan Calo. Digital Market Manipulation, George Washington Law Review, 08/15/2013.
  • Rosa-Branc Esteves and Joana Resende. Competitive Targeted Advertising with Price Discrimination, Working Paper, 03/01/2011.
  • Rebecca Goldin. Doting on Data, Notices of the AMS Book Review, 04/01/2009.
  • Joseph Stiglitz. Information And The Change In The Paradigm In Economics, Nobel Prize Lecture, 12/06/2001.

Subtopics

  • Price Discrimination Drives up Prices
  • Racial Profiling and Economic Exploitation
  • Subprime and Other Financial Services Exploitation

Media Reports

  • Use Behavioral Insights to Develop Better In-Store Promotions
  • Different Customers, Different Prices, Thanks To Big Data
  • Banks Mine Big Data to Get to Know You Better, and Better
  • Feds shut down high-tech mortgage scammers
  • Role of Interactive Advertising & the Subprime Scandal: Another wake-up call for FTC
  • New Heat for Google CEO: U.S. Says Google's Larry Page Knew About Improper Online Pharmacy Ads
  • The Local-Global Flip, or, "The Lanier Effect"
  • How Banks, Marketers Aid Scams
  • Web Coupons Know Lots About You, and They Tell
  • Websites Vary Prices, Deals Based on Users
View All Media Reports

Opinion

  • Is Apple the digital "Trojan Horse" that enables greater data collection? Its use of "behavioral targeting"
  • The Dangers of High-Tech Profiling, Using Big Data
  • Taking on Google's Monopoly Means Regulating Its Control of User Data
  • Google’s Pound of Flesh
  • Subprime Mortgage Bust Could Create Ad Trouble for Google

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