Behavior-based personalized pricing: When firms can share customer information

• Asymmetric duopolists compete for two periods on a line interval. • Information gathered in period 1 is used for personalized pricing in period 2. • They can agree to share customer information before the first period. • Information sharing is individually rational for firms. • Information sharing worsens consumers welfare but improves total surplus. We study a two-period model of behavior-based price discrimination where firms can agree to share customer information before the first-period competition begins, and the information can be used for personalized pricing in the second-period competition. We show that information sharing is individually rational for firms as it softens upfront competition when information is gathered, consumers are worse off as a result, but total surplus can increase thanks to the improved quality of matching between firms and consumers. These findings are robust to firm asymmetries and varying discount factors for consumers and firms.