  Product personalization opens the door to price discrimination. A rich
product line allows firms to better tailor products to consumers' tastes, but
the mere choice of a product carries valuable information about consumers that
can be leveraged for price discrimination. We study this trade-off in an
upstream-downstream model, where a consumer buys a good of variable quality
upstream, followed by an indivisible good downstream. The downstream firm's use
of the consumer's purchase history for price discrimination introduces a novel
distortion: The upstream firm offers a subset of the products that it would
offer if, instead, it could jointly design its product line and downstream
pricing. By controlling the degree of product personalization the upstream firm
curbs ratcheting forces that result from the consumer facing downstream price
discrimination.
