Designing Fair Systems for Consumers to Exploit Personalized Pricing

Abstract

Many online marketplaces personalize prices based on consumer attributes. Since these prices are private, consumers will not realize if they spend more on a good than the lowest possible price, and cannot easily take action to get better prices. In this paper we introduce a system that takes advantage of personalized pricing so consumers can profit while improving fairness. Our system matches consumers for 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, they are able to achieve the most fair outcomes. Conversely, when transaction prices are centrally set, consumers are often unwilling to transact. Minimizing the average price paid by an individual or group is most profitable for the system, while achieving a $67\%$ reduction in prices. We see that a high dispersion (or range) of original prices is necessary for our system to be viable. Higher dispersion can actually lead to increased consumer welfare, and act as a check against extreme personalization. Our results provide theoretical evidence that such a system could improve fairness for consumers while sustaining itself financially.