This thesis collects three papers in industrial organization and behaviour, unified in their focus on the digital economy. The first two papers study markets for subscription goods, which by the nature of the contract allow for rich forms of behaviour based price discrimination between consumers. The third paper investigates a novel and complex auction mechanism used in online auctions. Paying Consumers to Stay: Retention Pricing and Market Competition studies the competitive effect of retention discounts. These discounts are given to consumers identified by their current firm as considering a switch to a new provider. In telecommuncations markets, firms may obtain such information when consumers initiate a switching process. I model retention as a screening device in a two period model of switching cost and behaviour based price discrimination. In the second period, firms offer discounts to switching consumers, but use retention to defend the consumer against competing firms. This leads to fierce price competition, causing all prices to fall; first period prices generally rise, but don't off set the procompetitive effect. Retention reduces social welfare but raises consumer surplus. History Based Price Discrimination and Welfare in a Growing Market studies settings where an incumbent, who has a dominant market share among old consumers, faces potential entry. The incumbent is protected by switching costs in this segment, and can observe the purchase status of all consumers hence, third degree price discrimination is feasible. The entrant may induce consumers to reveal their purchase history through suitable offers. Under duopoly, price discrimination leads to lower prices and profits, but also lowers consumers surplus due to brand misallocation and inefficient switching. Thus, banning price discrimination increases welfare. However, regulation may also cause entry into an otherwise monopolised industry; this occurrs only when entry is inefficient; thus optimal policy calls for bans on price discrimination unless they cause entry. Of Pennies and Prospects: Understanding Behaviour in Penny Auctions studies a novelty type of ascending auctions where bidders pay a fee for each bid they place. The last bidder wins the auction thus a bid is essentially a bet on being the last bidder, adding a dimension of gambling to the auction. Also, like lotteries and slot machines, these auctions are often, but not always, highly protable for the seller. The paper then applies prospect theory to penny auctions, obtaining estimates for the probability weighting and value functions that are in lin with the literature. Moreover, the model can fit several stylised facts of bidder behaviour that are not explained by the alternative hypothesis of risk loving bidders.