Information Exchange and Distributional Implications of Price Discrimination with Internet Marketing in Agriculture

A price discrimination model is proposed to explain why firms provide extraneous information on Internet sites selling agricultural inputs. Whether an informative site is offered depends on price discrimination potential, which depends on how much farmers reveal heterogeneity by Internet behavior. Price discrimination is greater if information benefits are negatively correlated with farm size (or other characteristics), explaining why extraneous (not product‐related) information is offered on Internet sales sites. Price discrimination adversely affects some farmers but may be beneficial on average because it generates free information. Outcomes depend on whether Internet users are aware of price differentials on the basis of clickstream information.