Personalized Pricing and Consumer Welfare

We study the welfare implications of personalized pricing implemented with machine learning. use data from a randomized controlled field experiment to construct prices and validate these in field. find that unexercised market power increases profit by 55%. Personalization improves expected profits an additional 19% 86% relative nonoptimized price. While total consumer surplus declines under pricing, over 60% consumers benefit personalization. Under some inequity-averse functions, may even increase. Simulations reveal nonmonotonic relationship between granularity