Behavior-based price discrimination in a multi-dimensional preferences market

Abstract

This article is a first look at the profit and welfare effects of behavior-based price discrimination in a two-period multi-dimensional preferences model. Compared to one-dimensional models, we show that firms compete less aggressively in both periods and so new results are obtained. Specifically, under forward looking consumers and two symmetric dimensions, BBPD boosts industry profits at the expense of consumers. However, we show that the standard one-dimensional welfare results can prevail under asymmetric dimensions and myopic consumers.