Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game

93 Pages Posted: 2 Nov 2021 Last revised: 10 May 2022

See all articles by Louis-Daniel Pape

Louis-Daniel Pape

CREST - Institut Polytechnique de Paris

Christian Helmers

Santa Clara University

Alessandro Iaria

University of Bristol

Stefan Wagner

ESMT European School of Management and Technology

Julian Runge

Duke University (Visiting Scholar)

Multiple version iconThere are 2 versions of this paper

Date Written: October 28, 2021

Abstract

We use data from a mobile puzzle game to investigate the welfare consequences of price discrimination. We rely on experimental variation to characterize player behavior and estimate a model of demand for game content. Our counterfactual simulations show that the game developer's observed pricing is far from optimal. Profit would increase by 340% if the game developer used optimal uniform pricing instead. What is more important, our results suggest that optimal uniform pricing results in almost the same increase in profits as first-degree price discrimination (347%). All pricing strategies considered---including optimal uniform pricing---induce a transfer of surplus from players to game developer without, however, generating sizeable dead-weight losses.

Keywords: Price discrimination, personalized pricing, mobile apps, online games, freemium

JEL Classification: D40, L11

Suggested Citation

Pape, Louis-Daniel and Helmers, Christian and Iaria, Alessandro and Wagner, Stefan and Runge, Julian, Price Discrimination and Big Data: Evidence from a Mobile Puzzle Game (October 28, 2021). Available at SSRN: https://ssrn.com/abstract=3952016 or http://dx.doi.org/10.2139/ssrn.3952016

Louis-Daniel Pape (Contact Author)

CREST - Institut Polytechnique de Paris ( email )

Route de Saclay
Palaiseau, 91120
France

Christian Helmers

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Alessandro Iaria

University of Bristol ( email )

36 Tyndall's Park Road
Bristol, Avon BS8 1TB
United Kingdom
BS8 2EW (Fax)

Stefan Wagner

ESMT European School of Management and Technology ( email )

Schlossplatz 1
10117 Berlin
Germany

Julian Runge

Duke University (Visiting Scholar) ( email )

Box 90120
Durham, NC 27708-0120
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
169
Abstract Views
658
rank
239,011
PlumX Metrics