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"On the limitations of data-based price discrimination"


 
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1. Title Title of document On the limitations of data-based price discrimination
 
2. Creator Author's name, affiliation Haitian Xie; Guanghua School of Management, Peking University
 
2. Creator Author's name, affiliation Ying Zhu; Department of Economics, University of California San Diego
 
2. Creator Author's name, affiliation Denis Shishkin; Department of Economics, University of California San Diego
 
 
3. Subject Subject(s) Price discrimination, empirical revenue maximization, information theory, prior-independent pricing, optimal rate of convergence
 
3. Subject Subject classification D42, D82, C14, C44
 
4. Description Abstract The classic third degree price discrimination (3PD) model requires the knowledge of the distribution of buyer valuations and the covariate to set the price conditioned on the covariate. In terms of generating revenue, the classic result shows that 3PD is at least as good as uniform pricing. What if the seller has to set a price based only on a sample of observations from the underlying distribution? Is it still obvious that the seller should engage in 3PD? This paper sheds light on these fundamental questions. In particular, the comparison of the revenue performance between 3PD and uniform pricing is ambiguous overall when prices are set based on samples. This finding is in the nature of statistical learning under uncertainty: a curse of dimensionality, but also other small sample complications.
 
5. Publisher Organizing agency, location Econometric Society
 
6. Contributor Sponsor(s)
 
7. Date (YYYY-MM-DD) 2025-01-28
 
8. Type Status & genre Peer-reviewed Article
 
8. Type Type
 
9. Format File format pdf
 
10. Identifier Universal Resource Indicator https://econtheory.org/ojs/index.php/te/article/view/20250303
 
11. Source Journal/conference title; vol., no. (year) Theoretical Economics; Volume 20, Number 1 (January 2025)
 
12. Language English=en en
 
15. Rights Copyright and permissions Authors who publish in Theoretical Economics will release their articles under the Creative Commons Attribution-NonCommercial license. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given.