Behavior-Based Price Discrimination and Product Choice

We study a two-period model of behavior-based price discrimination in Fudenberg and Tirole (2000) but allow firms to make product choice in the first period. We show that the only possible equilibrium involves maximal differentiation. This is in contrast to Choe et al. (2018) where equilibrium features less than maximal differentiation when competition is in personalized pricing. Thus, our result highlights an important interplay between the type of price competition and product choice