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Languages : en
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Author: David Prakash
Publisher: BoD – Books on Demand
ISBN: 3756863514
Category : Business & Economics
Languages : en
Pages : 155
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Book Description
Digital technologies are driving the application of dynamic pricing. Today, this pricing strategy is used not only for perishable products such as flights or hotel rooms, but for almost any product or service category. With dynamic pricing, retailers frequently adjust their prices over time to respond to factors such as demand, their supply and that of competitors, or the time of sale. Additionally, dynamic pricing allows retailers to take advantage of a large share of consumers' willingness to pay while avoiding losses from unsold products. Ultimately, this can lead to an increase in revenue and profit. However, the application of dynamic pricing comes with great challenges. In addition to the technological implementation, companies have to take into account that dynamic pricing can cause complex and unintended behavioral consequences on the consumer side. The key objective of this dissertation is to provide a deeper understanding of the impact of dynamic pricing on consumer behavior. To this end, this dissertation presents insights from four perspectives. First, how reference prices as a critical component in purchase decisions are operationalized. Second, how customers search for products priced dynamically, differentiated by business and private customers, as well as by different devices used for the search. Third, whether and how dynamic pricing influences the impact of internal reference prices on purchase decisions. Finally, this dissertation demonstrates that consumers perceive price changes as personalized in different purchase contexts, leading to reduced perceptions of fairness and undesirable behavioral consequences.
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Publisher: GRIN Verlag
ISBN: 334643639X
Category : Business & Economics
Languages : en
Pages : 24
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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: Chen, Xi
Publisher:
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Languages : en
Pages : 0
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Author: Zhijun Chen
Publisher:
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Languages : en
Pages : 51
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We study a duopoly model where each firm chooses personalized prices for its targeted consumers, who can be active or passive in identity management. Active consumers can bypass price discrimination and have access to the price offered to non-targeted consumers, which passive consumers cannot. When all consumers are passive, personalized pricing leads to intense competition and total industry profit lower than that under the Hoteling equilibrium. But market is always fully covered. Active consumers raise the firm's cost of serving non-targeted consumers, which softens competition. When firms have sufficiently large and non-overlapping target segments, active consumers enable firms to extract full surplus from their targeted consumers through perfect price discrimination. With active consumers, firms also choose not to serve the entire market when the commonly non-targeted market segment is small. Thus active identity management can lead to lower consumer surplus and lower social welfare. We also discuss the regulatory implications for the use of consumer information by firms as well as the implications for management.
Author: Arian Aflaki
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Category :
Languages : en
Pages : 0
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Extant literature has shown that personalized pricing (PP), i.e., customizing prices for individual customers, can benefit firms and some customers. However, customer concerns about being targeted by such practices have raised debates on PP tactics. Using a Bayesian persuasion framework, we study whether and under what conditions price can signal such PP implementation to customers. We also investigate whether disclosing inventory availability information can alleviate customer concerns and benefit the stakeholders, including the firm and customers. We consider a dynamic personalized pricing and information provisioning game between a firm and a market of heterogeneous customers. In the first period, the firm sets the price to learn the customer valuations and maximize revenue. In the second period, the firm may implement PP using customer purchase history. Customers are uncertain about the inventory availability and implementation of PP. Therefore, they may not precisely identify whether their purchase history will be used for pricing. However, they update their beliefs about the possibility of PP upon receiving new information. We first study myopic customers who only consider their immediate utility when purchasing. We then transition to strategic customers who take their future utility into account. We show that price alone cannot always signal PP, hurting the firm and customers. We establish conditions under which a binary inventory signal--where the firm marks the inventory as scarce when it is less than a threshold--increases the firm revenue and benefits customers. Thus, firms can create transparency over their pricing strategies by disclosing inventory availability information.
Author: Stefano Colombo
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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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: Jean-Pierre Dubé
Publisher:
ISBN:
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Languages : en
Pages : 0
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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: Chongwoo Choe
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Languages : en
Pages :
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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: 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.
