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Discussion Paper

Selling Cookies

We develop a model of data pricing and targeted advertising. A monopolistic data provider determines the price to access “cookies,” i.e., informative signals about individual consumers’ preferences. The demand for information is generated by advertisers who seek to tailor their spending to the value of each consumer. We characterize the set of consumers targeted by the advertisers and the optimal monopoly price of cookies. The ability to influence the composition of the set of targeted consumers provides incentives to lower prices.