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Odlyzko on Price Discrimination and Privacy"

Joho the Blog: Odlyzko on Price Discrimination and Privacy

Odlyzko on Price Discrimination and Privacy
Andrew Odlyzko who has the annoying tendency to be right and, worse, fact-based about it has posted a paper called "Privacy, Economics, and Price Discrimination on the Internet." It is to appear in the Proceedings of the Fifth International Conference on eCommerce. From the abstract:
The rapid erosion of privacy poses numerous puzzles. Why is it occurring, and why do people care about it? This paper proposes an explanation for many of these puzzles in terms of the increasing importance of price discrimination.

I had never considered this arguement previously. Andrew Odlyzko's paper has given me a lot to think about in terms of my own personal privacy and also strategies that can be used in business.

Generally I am fairly relaxed in terms of revealing information about myself, as generally I believe it enables companies to target me with goods and service I would be interested in. I'm not totally naive. i understand the risks I expose myself to in this instance however I'd much rather have Amazon for example offer me books on science fiction than romantic fiction. Now that's targetting the message NOT discrimination on price. If his arguement does hold water in the real world then as an individual I believe that discrimination , in this way is inherently unfair, and like the consumers cited in Odlyzko's paper I would rebel. In high turnover, low margin markets is it always possible to discriminate in such a way, even online. After all, even if I am willing to pay £20 for a book, it doesn't mean to say that I will also look elsewhere to purchsae it cheaper. If erosion of privacy does lead to price discrimination by some vendors, this may well be counter productive, for while this leads to a clearer understanding of knowledge about the consumer, the Internet also gives consumers to have better knowledge about the marketplace. Consumers can make use of comparison sites, that while not allowing perfect knowledge, do allow for very rational decisions to be made. Price discriminiation is counter productive in this situation and consumer preferences are easily altered.

Looking from the other perspective, the introduction of loyalty schemes seem far more user friendly and may offer an incentive to allow customers to give up privacy in exchange for the benefit of lower prices in some areas but also giving the vendor addtional information to accurately target offers and increase their rate of sales. This type of approach appeals to me because it feels more of a partnership between vendor and seller rather than a competition.

I didn't read the whole of this paper so apologies if I missed some of the points I am making later on. I must finish it though!