Oh the Prices You'll See: Designing a Fair Exchange System to Mitigate Personalized Pricing
Aditya Karan, Naina Balepur, Hari Sundaram

TL;DR
This paper proposes a fairness-centered exchange system leveraging personalized pricing to improve consumer fairness and reduce costs, while maintaining system revenue, through strategic matching and transaction modeling.
Contribution
It introduces a novel exchange system that uses personalized pricing to enhance fairness and reduce costs, with analysis of different negotiation and pricing models.
Findings
Negotiating prices individually yields the fairest outcomes.
High price dispersion enables significant cost reductions.
System viability depends on substantial price variation.
Abstract
Many online marketplaces personalize prices based on consumer attributes. Since these prices are private, consumers may be unaware that they have spent more on a good than the lowest possible price, and cannot easily take action to pay less. In this paper, we introduce a fairness-centered exchange system that takes advantage of personalized pricing, while still allowing consumers to individually benefit. Our system produces a matching of consumers to promote trading; the lower-paying consumer buys the good for the higher-paying consumer for some fee. We explore various modeling choices and fairness targets to determine which schema will leave consumers best off, while also earning revenue for the system itself. We show that when consumers individually negotiate the transaction price, and our fairness objective is to minimize mean net cost, we are able to achieve the most fair outcomes.…
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Taxonomy
TopicsDigital Platforms and Economics
