The Curse of Knowledge: Having Access to Customer Information Can be Detrimental to Monopoles Profit


We show that a monopolist’s profit is higher if he refrains from collecting coarse information on hit customers, sticking to constant uniform pricing rather than recognizing customers’ segments through their purchase history. In the Markov-perfect equilibrium with coarse information collection, after each commitment period, a new introductory price is offered to attract new customers, creating a new market segment for price discrimination. Eventually, the whole market is covered. Shortening the commitment period results in lower profits. These results sharply differ from the ones obtained when the firm can uncover the exact willingness-to-pay of each previous customer.

Report No.: HIAS-E-93
Author(s): Didier Laussel(a)
Ngo Van Long(b), (c)
Joana Resende(d)
Affiliation: (a) Aix-Marseilles University
(b) McGill University
(c) Hitotsubashi Institute for Advanced Study, Hitotsubashi University
(d) University of Porto, CEF.UP
Issued Date: December 2019
Keywords: curse of knowledge; customers information; intertemporal price discrimination; Case conjecture; price personalization
JEL: L12, L15