Adaptation in Natural and Artificial Systems: An Introductory Analysis with Applications to Biology, Control and Artificial Intelligence
Privacy, economics, and price discrimination on the Internet
ICEC '03 Proceedings of the 5th international conference on Electronic commerce
Privacy in electronic commerce and the economics of immediate gratification
EC '04 Proceedings of the 5th ACM conference on Electronic commerce
The privacy cost of the second-chance offer
Proceedings of the 2005 ACM workshop on Privacy in the electronic society
Conditioning Prices on Purchase History
Marketing Science
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A previous paper demonstrates that if a seller always uses auction bids to later price discriminate against losing bidders, his revenue decreases dramatically. In this paper, we examine whether the seller obtains an advantage if he randomizes his strategy -- that is, if he does not use privacy-infringing information all the time, but only with probability ?;. Using both Bayesian techniques and genetic algorithm experiments, we determine optimal strategies for bidders and sellers in a two stage game: Stage I is a first price auction used to elicit information on a bidder's valuation; Stage II is, with probability ?;, a price discrimination offer, and, a fixed price offer P; else. Our results show that the seller does not benefit from randomized price discrimination. Further, low valuation bidders benefit more from the seller's use of privacy-infringing information than do the high valuation ones, as they may wish to signal that they cannot afford a high second-stage offer. To our knowledge, our use of genetic algorithm simulations is unique in the privacy literature.