Behavior Based Price Personalization Under Vertical Product Dfferentiation PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Behavior Based Price Personalization Under Vertical Product Dfferentiation PDF full book. Access full book title Behavior Based Price Personalization Under Vertical Product Dfferentiation by Paolo G. Garella. Download full books in PDF and EPUB format.
Author: Paolo G. Garella
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
Get Book Here
Book Description
We study price personalization in a two period duopoly with vertically differentiated products. In the second period a firm knows the purchase history of all customers, as in the standard Behavior Based Price Discrimination models. However in the second period it also has detailed personal information on its own customers, enabling it to quote personalized prices. The analysis reveals that there exists a natural market (nm) for each firm, defined as the set of customers that cannot be poached by the rival in period two. Since in equilibrium all contestable consumers belong to the largest nm, poaching will only be one way. The firm with the largest nm, has highest profits, but not necessarily the largest market share. All consumers gain from price personalization..Profits are lower than under uniform pricing. Quality choice is well defined for the low quality and a quality dfferential arises, though the exact choice for the high quality depends upon the cost specification.
Author: Paolo G. Garella
Publisher:
ISBN:
Category :
Languages : en
Pages : 25
Get Book Here
Book Description
We study price personalization in a two period duopoly with vertically differentiated products. In the second period a firm knows the purchase history of all customers, as in the standard Behavior Based Price Discrimination models. However in the second period it also has detailed personal information on its own customers, enabling it to quote personalized prices. The analysis reveals that there exists a natural market (nm) for each firm, defined as the set of customers that cannot be poached by the rival in period two. Since in equilibrium all contestable consumers belong to the largest nm, poaching will only be one way. The firm with the largest nm, has highest profits, but not necessarily the largest market share. All consumers gain from price personalization..Profits are lower than under uniform pricing. Quality choice is well defined for the low quality and a quality dfferential arises, though the exact choice for the high quality depends upon the cost specification.
Author: Thomas Gehrig
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
We evaluate behavior-based price discrimination from an antitrust perspective by focusing on an industry with inherited market dominance. Under horizontal differentiation behavior-based pricing does not by itself lead to persistence of dominance unless the dominant firm is protected by significantly higher switching costs than its small rival. This result continues to hold even if the dominant firm can use behavior-based pricing to compete against an entrant with no access to consumers' purchase histories. Under vertical differentiation behavior-based pricing enhances the dominance of the high-quality seller and, hence, consumer welfare.
Author: Chongwoo Choe
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
We study a two-period model of behavior-based price discrimination in Fudenberg and Tirole (2000) but allow firms to make product choice in the first period. We show that the only possible equilibrium involves maximal differentiation. This is in contrast to Choe et al. (2018) where equilibrium features less than maximal differ- entiation when competition is in personalized pricing. Thus, our result highlights an important interplay between the type of price competition and product choice.
Author: Juanjuan Zhang
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Ldquo;Behavior-based personalizationrdquo; has gained popularity in recent years, whereby businesses offer personalized products based on consumers' purchase histories. This paper highlights two perils of behavior-based personalization in competitive markets. First, although purchase histories reveal consumer preferences, competitive exploitation of such information damages differentiation, similar to the classic finding that behavior-based price discrimination intensifies price competition. With endogenous product design, there is yet a second peril. It emerges when forward-looking firms try to avoid the first peril by suppressing the information value of purchase histories. Ideally, if a market leader serves all consumers on day one, purchase histories contain no information about consumer preferences. However, knowing that their rivals are willing to accommodate a market leader, firms are more likely to offer a mainstream design at day one, which jeopardizes differentiation. Based on this understanding, I investigate how the perils of behavior-based personalization change under alternative market conditions, such as firms' better knowledge about their own customers, consumer loyalty and inertia, consumer self-selection, and the need for classic designs.
Author: Anindya Ghose
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
We develop an analytical framework to investigate the competitive implications of personalized pricing technologies (PP). These technologies enable first-degree price discrimination: firms charge different prices to different consumers, based on their willingness to pay. We first show that, even though a monopolist makes a higher profit with PP, its optimal quality is the same with or without PP. Next, we show that in a duopoly setting, personalized pricing adds value only if it is associated with product differentiation. We then consider a model of vertical product differentiation, and show how personalized pricing on the Internet affects firms' choices of quality differentiation in a competitive scenario. There are two equilibria. We find that, when the PP firm has a high quality both firms raise their qualities, relative to the uniform pricing case. Conversely, when the PP firm has low quality, both firms lower their qualities. While it is optimal for the firm adopting PP to increase product differentiation, the non-PP firm seeks to reduce differentiation by moving in closer in the quality space. Our model also points out firms' optimal pricing strategies with PP, which may be non-monotonic in consumer valuations. Depending on the convexity of the marginal cost function, we outline the incentives of firms to deploy such technologies. Our model shows it is an optimal strategy for the low quality firm to adopt PP, if the other firm does not. Regardless of whether the low quality firm has PP, the high quality firm should adopt PP only if the cost function is not too convex. Next, if both firms acquire PP, then both firms earn lower profits than in the case where neither firm has PP. Essentially, they are trapped in a prisoner's dilemma. Finally, we show that, consumer surplus is highest when both firms adopt PP. Thus, despite the threat of first degree price discrimination, personalized pricing with competing firms can lead to an overall increase in consumer welfare.
Author: Jorge Vargas Florez
Publisher: Springer Nature
ISBN: 3031068629
Category : Business & Economics
Languages : en
Pages : 560
Get Book Here
Book Description
This proceedings volume convenes selected, peer-reviewed contributions presented at the POMS 2021 – International Conference on Production and Operations Management, which was virtually held in Lima, Peru, December 2-4, 2021. This book presents results in the field of Operations Management of key relevance to practitioners, instructors, and students. Topics focus on Operations Management, Logistics and Supply Chain Management, and Industrial and Production Engineering and Management, where mathematics and its applications play a role. In this work, readers will find a colorful collection of real-world case studies, accompanied by operations research-based managerial models. They touch on myriad topics, ranging from Artificial Intelligence and Data Analytics in Operations, Defense, Tourism, and other emerging issues in Operations Management to Healthcare Operations Management and Humanitarian Operations and Crisis Management. The POMS Lima 2021 International Conference has been organized by the Latin America & Caribbean Chapter of the Production and Operations Management Society, the most renowned professional and academic organization representing the interests of production and operations management professionals and academicians around the world. Since 2018, POMS International Conferences have been organized by POMS-LA, the first venue being in Rio de Janeiro, Brazil. Venue 2021 event was hosted by the Pontifical Catholic University of Peru and Pacific University, two Peruvian Latin-American leading academic institutions from Peru.
Author: Chongwoo Choe
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
We study a model of behavior-based price discrimination where firms can agree to share customer information that can be used for personalized pricing. We show that firms are better off sharing customer information as it softens up-front competition when they gather information, consumers are worse off as a result, but total surplus can increase thanks to the improved quality of matching between firms and consumers.
Author: Terrence Hendershott
Publisher: Elsevier Science Limited
ISBN: 9780444517715
Category : Business & Economics
Languages : en
Pages : 692
Get Book Here
Book Description
Contains chapters that focus on the individual interrelated subjects regarding the economics of information systems: the adoption and diffusion of information technologies; the pricing of data communications; the means and tactics firms us to compete with each other; and the manner in which firms interact with and distribute goods to customers.
Author: Thomas Gehrig
Publisher:
ISBN:
Category : Market share
Languages : en
Pages : 0
Get Book Here
Book Description
Author: Didier Laussel
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
We present a model of market hyper-segmentation, where a monopolist acquires within a short time all information about the preferences of consumers who purchase its vertically differentiated products within a given period. The firrm offers a new price/quality schedule after each commitment period. Lower consumer types may have an incentive to delay their purchases until next period to obtain a better introductory offer to new customers. The monopolist counters this incentive by offering higher informational rents. Considering the dynamic game played by the monopolist and its customers, we find that there is always a Markov perfect equilibrium (MPE) in which the firm immediately sells the good to all its customers, offering the Mussa-Rosen static equilibrium schedule to first time customers (and getting full commitment profits). However, if the commitment period between two offers is long enough, there is another MPE, where the number of customers that are served expands only gradually. Contrary to the Coasian result for a durable-good monopoly, we find that in both equilibria the profit of the monopolist increases (and the consumers' expected surplus decreases) as the interval of commitment shrinks. The model yields policy implications for regulation on information collection and commitment period.
