Granular and Hybrid Price Discrimination on an Online Platform

This paper analyzes granular price discrimination informed by consumer data on an online platform. The sellers compete in prices over two periods and can use information on consumers’ first period purchasing choices to discriminate in the second period. Under ‘coarse discrimination’, they discriminate between new and returning customers. Under ‘granular discrimination’, using market-wide data, they also discriminate amongst new customers. The symmetric equilibria in these regimes have distinctive features. Expected industry profit increases in the granularity of discrimination. Under ‘hybrid discrimination’, the platform is vertically integrated and only its subsidiary accesses market-wide data and discriminates granularly. Under mild conditions, the subsidiary’s expected equilibrium profit under hybrid discrimination is the same as under granular discrimination. Under more stringent conditions, this payoff equivalence holds for all sellers