When and How is the Internet Likely to Decrease Price Competition?
Marketing Science
Individual Marketing with Imperfect Targetability
Marketing Science
Consumer Addressability and Customized Pricing
Marketing Science
Competitive One-to-One Promotions
Management Science
Decision Support Systems - Special issue: Economics and information systems
Conditioning Prices on Purchase History
Marketing Science
A Markov-based collaborative pricing system for information goods bundling
Expert Systems with Applications: An International Journal
Economic incentives to adopt electronic payment schemes under competition
Decision Support Systems
Information Personalization in a Two-Dimensional Product Differentiation Model
Journal of Management Information Systems
On the Optimal Product Line Selection Problem with Price Discrimination
Management Science
Resource Allocation Policies for Personalization in Content Delivery Sites
Information Systems Research
Product Variety and Capacity Investments in Congested Production Systems
Manufacturing & Service Operations Management
A design model for knowledge-based pricing services in the retail industry
International Journal of Web Engineering and Technology
A design model for knowledge-based pricing services in the retail industry
International Journal of Web Engineering and Technology
Competitive Behavior-Based Price Discrimination for Software Upgrades
Information Systems Research
Service design of consumer data intermediary for competitive individual targeting
Decision Support Systems
Hi-index | 0.02 |
We develop an analytical framework to investigate the competitive implications of personalized pricing (PP), whereby firms charge different prices to different consumers based on their willingness to pay. We embed PP in a model of vertical product differentiation and show how it affects firms' choices over quality. We show that firms' optimal pricing strategies with PP may be nonmonotonic in consumer valuations. When the PP firm has 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. Although many firms are trying to implement such pricing policies, we find that a higher-quality firm can actually be worse off with PP. 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. While PP results in a wider market coverage, it also leads to aggravated price competition between firms. Because this entails a change in equilibrium qualities, the nature of the cost function determines whether firms gain or lose by implementing such PP policies. Despite the threat of first-degree price discrimination, we find that PP with competing firms can lead to an overall increase in consumer welfare.