Practice Job Talk (Theory): Chengcheng Wang, Economics PhD Candidate

Presentation from Chengcheng Wang, PhD Candidate in the Department of Economics.

PAPER TOPIC: Differentially Private Market Segmentation

ABSTRACT: Differential privacy limits how much the data used for personalized pricing can reveal about a consumer’s valuation. I characterize the consumer and producer surplus attainable under this restriction. Every consumer-surplus maximizer leaves the monopolist at its uniform-price profit. A profit-preserving segmentation also minimizes consumer surplus under an upper-tail revenue bound. With two valuations, the set of welfare outcomes expands from a point to a line segment and then a triangle as privacy is relaxed. With any finite number of valuations, the set is a polygon, and any attainable welfare outcome can be implemented by a segmentation in which a different price is charged in each segment. Price-activation thresholds determine when disclosure first changes welfare and whether consumers can gain or lose relative to uniform pricing. Sufficiently strict privacy leaves only the uniform-price outcome, while relaxing privacy expands the set of feasible welfare outcomes. Stronger privacy protection can therefore work against the goal of improving consumer welfare by lowering the maximum attainable consumer surplus.