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Author: Stefano Colombo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We consider a duopoly model where firms can identify only a share of consumers, which is positively correlated with the consumer' preferences. Firms charge personalized prices to the consumers they can recognize and a uniform price to the rest of consumers. The firms' available information is given by the combination of two factors: the intensive margin, which determines the share of consumers the firms can recognize in each single location, and the extensive margin, which determines how many locations the firms can identify. Different market configurations emerge according to the size of these margins. We characterize the values of the intensive and extensive margins that maximize firms' profits, and we show that profits are non-monotonic. We also show that the composition, in addition to the size, of the available information - i.e., the mix of these margins - affects firms' profits significantly. Implications for regulatory policies concerning the protection of consumers' information are finally discussed.
Author: Stefano Colombo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We consider a duopoly model where firms can identify only a share of consumers, which is positively correlated with the consumer' preferences. Firms charge personalized prices to the consumers they can recognize and a uniform price to the rest of consumers. The firms' available information is given by the combination of two factors: the intensive margin, which determines the share of consumers the firms can recognize in each single location, and the extensive margin, which determines how many locations the firms can identify. Different market configurations emerge according to the size of these margins. We characterize the values of the intensive and extensive margins that maximize firms' profits, and we show that profits are non-monotonic. We also show that the composition, in addition to the size, of the available information - i.e., the mix of these margins - affects firms' profits significantly. Implications for regulatory policies concerning the protection of consumers' information are finally discussed.
Author: Chongwoo Choe
Publisher:
ISBN:
Category :
Languages : en
Pages :
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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:
Publisher: GRIN Verlag
ISBN: 334643639X
Category : Business & Economics
Languages : en
Pages : 24
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Book Description
Academic Paper from the year 2020 in the subject Business economics - General, grade: 72/100 (First Class Honours), Trinity College Dublin, language: English, abstract: This essay is about pricing, a core area of marketing. More specifically, it is about personalised pricing, which must not be confused with dynamic pricing. Personalised pricing describes adjusting the price for every single customer individually, while dynamic pricing describes adjusting the price for all customers subject to external factors like the current demand as of this moment, for example. If an airline company for instance lifts prices on weekends because demand is stronger on weekends in general, this is dynamic pricing. If the airline company however increases the price only for one particular customer, because they find out, for instance, that the customer uses a certain computer type which makes him likely to be wealthier than other customers, this is personalised pricing. The underlying motivation of this essay is to critically assess how personalised pricing is carried out and whether it should be adopted. Therefore, this essay takes the following approach and structure. Firstly, it is examined whether personalised pricing is legally permitted. Only if it is legally permitted to personalise prices it is worthwhile to further investigate this topic. Secondly, the customer’s willingness to pay is analysed. In order to personalise prices, it is necessary to know a customer’s exact willingness to pay. Thirdly, the topic of price elasticity is elaborated. It is necessary to assess whether profit is increased via increasing prices or decreasing prices and therefore higher demand. Fourthly, resulting retaliation as a consequence is explored. It is critically examined whether personalised pricing should be adopted, and empirical evidence is gathered to determine a retribution effect of personalised pricing which might end up making this practice unprofitable.
Author: Jean-Pierre Dubé
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We study the welfare implications of personalized pricing, an extreme form of third-degree price discrimination implemented with machine learning for a large, digital firm. Using data from a unique randomized controlled pricing field experiment we train a demand model and conduct inference about the effects of personalized pricing on firm and consumer surplus. In a second experiment, we validate our predictions in the field. The initial experiment reveals unexercised market power that allows the firm to raise its price optimally, generating a 55% increase in profits. Personalized pricing improves the firm's expected posterior profits by an additional 19%, relative to the optimized uniform price, and by 86%, relative to the firm's unoptimized status quo price. Turning to welfare effects on the demand side, total consumer surplus declines 23% under personalized pricing relative to uniform pricing, and 47% relative to the firm's unoptimized status quo price. However, over 60% of consumers benefit from lower prices under personalization and total welfare can increase under standard inequity-averse welfare functions. Simulations with our demand estimates reveal a non-monotonic relationship between the granularity of the segmentation data and the total consumer surplus under personalization. These findings indicate a need for caution in the current public policy debate regarding data privacy and personalized pricing insofar as some data restrictions may not per se improve consumer welfare.
Author: Cactus Raazi
Publisher: Lioncrest Publishing
ISBN: 9781544506111
Category : Business & Economics
Languages : en
Pages : 174
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Book Description
Price is the primary feature of every transaction-so why is it often treated as an afterthought? Most companies use pricing approaches developed before the internet, failing to harness modern analytics. Your customer relationships vary widely; shouldn't each customer's loyalty to your product or service be reflected in their price? In this age of increasing price transparency, uniform pricing is no longer sufficient. The best way forward is to create personalized pricing for your loyal customers and resist the constant discounting pressure of internet price aggregation. In Price, Cactus Raazi invites you to shake loose of your pricing preconceptions. Whether you're a corporate executive or a sole proprietor, you'll see how personalized pricing can improve customer loyalty and turn episodic transactions into recurring revenue. With price transparency and aggressive discounting here to stay, now is the time to refocus your pricing approach on your individual customer.
Author: Anindya Ghose
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
We embed the principal-agent model in a model of spatial differentiation with correlated consumer preferences to investigate the competitive implications of personalized pricing and quality allocation (PPQ), whereby duopoly firms charge different prices and offer different qualities to different consumers, based on their willingness-to-pay. Our model sheds light on the equilibrium product-line pricing and quality schedules offered by firms, given that none, one, or both firms implement PPQ. The adoption of PPQ has three effects in our model: it enables firms to extract higher rents from loyal customers, intensifies price competition for non-loyal customers, and eliminates cannibalization from customer self-selection. Contrary to prior literature on one-to-one marketing and price discrimination, we show that even symmetric firms can avoid the well-known Prisoner's Dilemma problem when they engage in personalized pricing and quality customization. When both firms have PPQ, consumer surplus is non-monotonic in valuations such that some low valuation consumers get higher surplus than high valuation consumers. The adoption of PPQ can reduce information asymmetry, and therefore sellers offer higher quality products after the adoption of PPQ. Overall, we find that while the simultaneous adoption of PPQ generally improves total social welfare and firm profits, it decreases total consumer surplus.
Author: Sumit Shrivastav
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Xin Zhang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
The proliferation of consumer data and advanced data analytics techniques (e.g., machine learning), has empowered firms to implement personalized pricing by learning individual consumer preferences. Behavioral research and anecdotal evidence suggest that consumers exhibit aversion to such a pricing practice for various reasons, such as fear of price fraud, perceived violation of social norms, unfairness, privacy concerns, etc. However, little research has examined how consumers' aversion, which inflicts a disutility on consumers, influences the impact of personalized pricing on firms and consumers in a competitive setting. Using a game-theoretic model, we investigate the effect of consumers' aversion when competing firms use personalized pricing in a market where firms have differing extents of information access to different consumer segments (i.e., different consumer addressability). Interestingly, our result shows that personalized pricing does not necessarily hurt consumers even we consider consumers are averse to it. Contrary to conventional wisdom, firms' profits from conducting personalized pricing may increase with consumers' aversion level, whereas consumer surplus decreases. The driving force is that a high aversion level enables firms to poach exclusive target consumers of the rival firm at a high uniform price. Finally, when consumers' aversion is not very high, greater exclusive access to consumer data can work against the firms. Our findings provide implications for managers on using consumer data for personalized pricing and add to policy debates on how personalized pricing could affect consumer interests.
Author: Sr Sarmento
Publisher: Publishers
ISBN: 9781805285656
Category :
Languages : en
Pages : 0
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Book Description
"Consumer Viewpoint on Personalized Pricing" is a thought-provoking book authored by Sr Sarmento. The book explores the complex issue of personalized pricing, where companies tailor prices based on consumer data such as their browsing history, demographics, and purchase behavior. The book provides a comprehensive analysis of this controversial practice, its implications on consumer behavior, and the ethical considerations surrounding it. The book starts by defining personalized pricing and discussing its evolution from traditional pricing methods. It then delves into the various forms of personalized pricing, such as dynamic pricing, surge pricing, and discriminatory pricing. The author discusses the pros and cons of each type and how they affect consumers' purchasing decisions. The book then addresses the ethical concerns surrounding personalized pricing. The author argues that companies must ensure that personalized pricing is fair and transparent, and consumers should have the right to access their data and control how it's used. The book also explores the potential for personalized pricing to exacerbate existing social inequalities, such as discriminating against low-income consumers or marginalized groups. Throughout the book, the author presents various real-life examples of personalized pricing and how consumers have responded to them. The author also discusses how technology has made personalized pricing more prevalent and sophisticated, raising questions about privacy and data protection. In conclusion, "Consumer Viewpoint on Personalized Pricing" is a must-read book for anyone interested in the intersection of business, technology, and ethics. The author's writing is engaging and accessible, making it suitable for both academics and the general public. The book provides a balanced view of personalized pricing, acknowledging its potential benefits while also highlighting the need for transparency and fairness. Overall, it's an insightful and thought-provoking read that will leave readers questioning the impact of personalized pricing on our society.
Author: Harold Houba
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Data-driven AI pricing algorithms in on-line markets collect consumer information and use it in their pricing technologies. In the simplest symmetric Hotellingís model such technologies reduce prices and proÖts. We extend Hotellingís model with vertically di§erentiated products, cost asymmetries and arbitrary adjustment costs. We provide a characterization of competition in personalized pricing: Sellers compete in o§ering consumer surplus, personalized prices are constrained monopoly prices and social welfare is maximal. For linear adjustment costs, adopting personalized pricing technology is a dominant strategy for both sellers. We derive conditions under which the most effi cient seller increases her proÖt through personalized pricing. While aggregate consumer surplus increases, consumers with high switching costs may be hurt. Finally, we discuss several extensions of our approach such as oligopoly.
