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We study the implications of aggregating consumers’ purchase histories into scores that proxy for unobserved willingness to pay. A long-lived consumer interacts with a sequence of firms. Each firm relies on the consumer’s current score–a linear aggregate of noisy purchase signals—to learn about her preferences and to set prices. If the consumer is strategic, she reduces her demand to manipulate her score, which reduces the average equilibrium price. Firms in turn prefer scores that overweigh past signals relative to applying Bayes’ rule with disaggregated data, as this mitigates the ratchet effect and maximizes the firms’ ability to price discriminate. Consumers with high average willingness to pay benefit from data collection, because the gains from low average prices dominate the losses from price discrimination. Finally, hidden scores—those only observed by the firms—reduce demand sensitivity, increase average prices, and reduce consumer surplus, sometimes below the naive-consumer level.

Central Planning of production is usually performed under asymmetric information. The firm in general has more information about its productive possibilities than the Central Planner (from now on for short CP). This justifies the use of incentives schemes in which the CP does not directly fix activity levels. Casual observation of such existing schemes suggests that the time dimensions is crucial for their working. Typically the CP revises the incentive scheme over time to take into account the information provided by the firm's performance. Managers of centrally planned economies as well as economists have long recognized that this revision induces firms to underproduce in order to avoid demanding schemes in the future. This is the ratchet effect. It is purpose of the present paper to study the ratchet effect under the non-commitment assumption, which we believe to be more realistic, The inadequacy of conceptual tools made if difficult in the past to consider such an assumption. Now basic research on dynamic games with incomplete information recently resulted in new ideas which look particularly relevant for a theoretical analysis of the problem.