The Economics of Data Flashcards
Definition of Big Data
Information asset characterized by high velocity, variety, volume to require specific technology and analytical methods for its transformation into value
what are the four v of big data
velocity
volume
variety
value (transformation by tools needed to do this)
Publically observed meaning
through device, operating systems, ip addresses
Discuss information that is voluntarilty provided by consumers
when registering - personal information is provided
login based data - information about products being looked for, purchases etc
Which methods are used for tracking customers online
Tracking cookies: specific cookie that is distributed, shared and read across two or more unrelated websites
Browser and device fingerprinting: method of tracking browsers by the configuration and settings information they make available to websites
History sniffing: tracking which sites viewer has visited
cross-device tracking - ability to interact with the same consumer across devices both online and offline modes
Whata are data brokers
primary business is collective personal information about consumers from a variety of sources and aggregating, analyizign and sharing information or information derived from it for market, fraud detection, verifying identity,
Describe the situation in the US with data brokers
own huge amount of data on almost every house hold in the US
combine offline and online data from multiple sources
analyze the data and make inferences about consumers, placing them into categories that may be sensitive
Describe data uses for firms - with the data as input
improving products/services
personalization
improving processes, marketing and organization
targeting
Describe data uses for firms as an output
Data sales
Definition of price discrimination
a firm price discriminates when it charges two consumers or the same consumer different prices for two units of the same or similar products and the price difference does not reflect in cost differences
Extracts as much as possiblewh
when is price discrimination viable
firme should have some market power
there are no or limited possibilities of arbitrage or resale
What are the three types of price discrimination
first degree - personalized pricing - firms observe all relevant heterogeneity and capture the entire consumer surplus
third degree - group pricing - firms observe some but not all the relevant heterogeneity and construct groups. Using direct singnals about demand, they price to discriminate between groups - not within groups
second degree - versioning - when the relevant heterogeneity cannot be observed - firms can still offer menus of options or packages and consumers self select and option/package based on their preferances
Explain how data can facilitate price discrimination
firms can collect data to estimate consumers willingness to pay
more information, more accurate calculations of willingness to pay can be calculated
to the extent of their market power - the firm can set discriminating prices based on the estimation
Explain personalized pricing
price set for a specific user based on the information gathered from them and their activity
technology does exist
why is targeted pricing hardly observed
fear of negative consumer reaction
observed as unfair when they pay a premium
may undermine consumer trust in online markets
what are more acceptable ways to achieve the same results as a firm would from personalized pricing
personalized discounts
search discrimination/steering (showing different products to consumers of different groups)
could be based on consumer hardware
Discuss conditioning prices on purchase history
seller has tech to record purchase history of consumers
consumers have tech to avoid being tracked
how a seller can condition prices
- new customer - seller offers price
- records behaviors
- comes again -> price can be conditioned on previous behavior
is it profitable to condition prices on purchase history
Discuss pricing for naive consumers
consumers are naive if an absense of privacy benefits the seller
- there is vh and vl prices
price is set at slightly lower than vH at p1, then if bought, price is set at vH at p2
consumers of L do not purchase good, the price is then set to vL at p2
Discuss pricing for rational consumers
they can decide not to purchase the good today to avoid paying a high price tomorrow
seller must consider strategic reaction to its pricing decision
with rational consumers they make the highest profits by setting uniform prices
Discuss personalized pricing in an oligopoly
what is the effect of a switch from uniform to personalized prices
all competing firms have access to the same information about consumers tastes and preferences
- id one firm can introduce personalized prices, this firm can increase its profits
- if all firms switch, competition can either increase or decrease
- balance between possibility to extract surplus and intensified
competition on some consumer segments.
On the industry level the availability of big data containing
consumer information can be either beneficial or harmful
Discuss big data and consumer privacy
do consumers care about privacy
is there a growing distrust from consumers
there is competing in private - who is better at keeping your privacy and respecting it
