Abstract

Online retailers are using advances in data collection and computing technologies to “personalize” prices, i.e., offer goods for sale to shoppers at their reservation prices, or the highest price they are willing to pay. In this paper, I offer a criticism of this practice. I begin by putting online personalized pricing in context. It is not something entirely new, but rather a kind of price discrimination, a familiar pricing practice. I then offer a fairness-based argument against it. When an online retailer personalizes prices, it competes unfairly for the social surplus created by a transaction. I defend this argument against objections, and offer a simple remedy: online retailers should either disclose that they are personalizing prices, or stop doing so.