Marketplace’s incentives to promote a personalized pricing device: does it pay-off to boost consumer disloyalty?

We model a duopoly competition on a marketplace represented by a Hotelling segment of consumers and where firms hold data on these consumers. The firms can decide whether to personalize prices - upon using a costly program owned by the marketplace - or quote costless uniform prices. We suppose one firm holds more experience in data than the other and consequently pays less for the program. On the other hand, the marketplace can distort the consumer preferences from uniform to triangular through ads, i.e. provokes more consumer indifference between the firms (persuasive advertising). We find that the marketplace has a clear incentive to distort consumer preferences when asymmetry in terms of payment for the program is intermediate and the program tariff is high. However, the incentive depends on its beliefs about the firms’ choice when asymmetry is weak and the program tariff is lower. Finally, when the marketplace distorts consumer preferences in the regions where it has an incentive to do so, it harms the firms’ profits while benefits the consumers