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Author: Hoe Sang Chung
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper examines the profitability of behavior-based price discrimination (BBPD) by duopolists producing horizontally differentiated experience goods. Considering a three-stage game in which the firms first make price discrimination decisions followed by two-stage pricing decisions, the two main results we obtain are the following: (i) if consumers underestimate the quality of the products at a level that is not very low, there are two subgame perfect Nash equilibria where both firms do not collect information about consumers' purchase histories so that neither firm price discriminates and where both firms collect consumer information to practice BBPD; (ii) BBPD is more profitable than uniform pricing if consumers overestimate at a more than moderate level.
Author: Hoe Sang Chung
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper examines the profitability of behavior-based price discrimination (BBPD) by duopolists producing horizontally differentiated experience goods. Considering a three-stage game in which the firms first make price discrimination decisions followed by two-stage pricing decisions, the two main results we obtain are the following: (i) if consumers underestimate the quality of the products at a level that is not very low, there are two subgame perfect Nash equilibria where both firms do not collect information about consumers' purchase histories so that neither firm price discriminates and where both firms collect consumer information to practice BBPD; (ii) BBPD is more profitable than uniform pricing if consumers overestimate at a more than moderate level.
Author: Chongwoo Choe
Publisher:
ISBN:
Category :
Languages : en
Pages :
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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: Bing Jing
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
In a two-period model of nondurable experience goods, we compare the profit and social welfare effects of behavior-based price discrimination (BBPD) and price commitment (PC) (relative to time-consistent pricing) in a monopoly. We find that when the static, full-information monopoly price is higher (lower) than the mean consumer valuation, PC yields higher (lower) profits and social welfare than BBPD. We also identify the market conditions under which BBPD does not increase firm profits and provide an explanation as to when the firm should discriminate against its first-time and repeat customers, respectively.
Author: Rosa Branca Esteves
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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This paper offers a complete picture of the impact of behavior-based price discrimination on profits, consumer surplus, and welfare in markets with a general demand function, where consumers and firms can discount the future at different discount factors. Regardless of the demand function considered, in comparison to uniform pricing, BBPD reduces firmsí second-period prices and profits. In contrast, we show that new results arise regarding the impact of BBPD on first-period prices. Under perfectly inelastic and CES demand, the firm-side e§ect is null and the consumer-side e§ect fully explains the increase in first-period prices. This is no longer the case when the price elasticity of demand varies with price level. Specifically, we show that the firm-side effect can lead firms to raise first-period prices, even when consumers are myopic. We also show that, depending on the demand function considered, the consumer side effect can act to reduce or increase first-period prices. The overall impact of BBPD on first-period prices depends on the interplay between these two effects. Our analysis reveals that the output effect and consumer switching play an important role in explaining the impact of BBPD on welfare. When discount factors are equal, BBPD may have a positive or negative impact on consumer surplus and social welfare, which contrasts with the result that BBPD is beneficial for consumers under a unit and CES demand. For a linear demand function, we identify the regions for firms and consumers discount factors where BBPD can simultaneously enhance or reduce total discounted profits, consumer surplus, and social welfare.
Author: Fouad Sabry
Publisher: One Billion Knowledgeable
ISBN:
Category : Business & Economics
Languages : en
Pages : 374
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Book Description
What is Price Discrimination Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are sold at different prices by the same provider in different market segments. Price discrimination is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy. Price differentiation essentially relies on the variation in the customers' willingness to pay and in the elasticity of their demand. For price discrimination to succeed, a firm must have market power, such as a dominant market share, product uniqueness, sole pricing power, etc. All prices under price discrimination are higher than the equilibrium price in a perfectly competitive market. However, some prices under price discrimination may be lower than the price charged by a single-price monopolist. Price discrimination is utilized by the monopolist to recapture some deadweight loss. This Pricing strategy enables firms to capture additional consumer surplus and maximize their profits while benefiting some consumers at lower prices. Price discrimination can take many forms and is prevalent in many industries, from education and telecommunications to healthcare. How you will benefit (I) Insights, and validations about the following topics: Chapter 1: Price discrimination Chapter 2: Monopoly Chapter 3: Monopolistic competition Chapter 4: Oligopoly Chapter 5: Perfect competition Chapter 6: Imperfect competition Chapter 7: Deadweight loss Chapter 8: Two-part tariff Chapter 9: Pricing Chapter 10: Barriers to entry Chapter 11: Yield management Chapter 12: Market power Chapter 13: Non-price competition Chapter 14: Market structure Chapter 15: Pricing strategies Chapter 16: Dynamic pricing Chapter 17: Revenue management Chapter 18: Value-based pricing Chapter 19: Rental value Chapter 20: Profit (economics) Chapter 21: Monopoly price (II) Answering the public top questions about price discrimination. (III) Real world examples for the usage of price discrimination in many fields. Who this book is for Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Price Discrimination.
Author: Stefano Colombo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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In this article, we develop a model encompassing behavior-based discriminatory pricing as a limit case of a more general framework where firms have incomplete information about consumers' purchase histories. We show that information accuracy has a nonmonotonic impact on profits and the worst situation for firms is when information accuracy is intermediate. We also discuss welfare and consumer surplus implications of information accuracy. Although welfare monotonically decreases with the level of information accuracy, there is an inverse U-shape relationship between consumers surplus and information accuracy.
Author: Stefano Colombo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We develop a model of behavior- and characteristic-based discriminatory pricing where consumers are heterogeneous both in tastes and in price sensitivity. Each firm is able to distinguish between the consumers that have bought from it and those that have bought from the rival. Furthermore, each firm learns the price sensitivity of their own consumers. We show that using this additional information may yield higher profits than uniform pricing provided that consumers are heterogeneous enough with respect to price sensitivity. We also discuss consumer surplus implications of such behavior- and characteristic-based price discrimination, and we show that the impact of price discrimination depends on both the consumer type and the level of consumers' heterogeneity.
Author: Terrence Hendershott
Publisher: Elsevier Science Limited
ISBN: 9780444517715
Category : Business & Economics
Languages : en
Pages : 692
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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: Krista J. Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 37
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Book Description
Firms tracking consumer purchase information often use behavior-based pricing (BBP), i.e., price discriminate between consumers based on preferences revealed from purchase histories. However, behavioral research has shown that such pricing practices can lead to perceptions of unfairness when consumers are charged a higher price than other consumers for the same product. This paper studies the impact of consumers' fairness concerns on firms' behavior-based pricing strategy, profits, consumer surplus, and social welfare. Prior research shows that BBP often yields lower profits than profits without customer recognition or behavior-based price discrimination. In contrast, we find that firms' profits from conducting BBP increase with consumers' fairness concerns. When fairness concerns are sufficiently strong, practicing BBP is more profitable than without customer recognition. However, consumers' fairness concerns decrease consumer surplus. In addition, when consumers' fairness concerns are sufficiently strong, they reduce inefficient switching and improve social welfare.
Author: Sumit Shrivastav
Publisher:
ISBN:
Category :
Languages : en
Pages :
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