Download or read book Competitive Personalized Pricing written by Zhijun Chen and published by . This book was released on 2018 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Personalized Pricing and Quality Customization written by Anindya Ghose and published by . This book was released on 2008 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Personalized Pricing Competition and Welfare written by Harold Houba and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Personalized Pricing and Quality Differentiation written by Anindya Ghose and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Personalized Pricing and Distribution Strategies written by Bruno Jullien and published by . This book was released on 2022 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: The availability of consumer data is inducing a growing number of firms to adopt more personalized pricing policies. This affects both the performance of, and the competition between alternative distribution channels, which in turn has implications for firms' distribution strategies. We develop a formal model to examine a brand manufacturer's choice between mono distribution (selling only through its own direct channel) or dual distribution (selling through an independent retailer as well). We consider different demand patterns, covering both horizontal and vertical differentiation and different pricing regimes, with the manufacturer and retailer each charging personalized prices or a uniform price. We show that dual distribution is optimal for a large number of cases. In particular, this is always the case when the channels are horizontally differentiated, regardless of the pricing regime; moreover, if both firms charge personalized prices, a well-designed wholesale tariff allows them to extract the entire consumer surplus. These insights obtained here for the case of intra-brand competition between vertically related firms are thus in stark contrast to those obtained for inter-brand competition, where personalized pricing dissipates industry profit. With vertical differentiation, dual distribution remains optimal if the manufacturer charges a uniform price. By contrast, under personalized pricing mono distribution can be optimal when the retailer does not expand demand sufficiently. Interestingly, the industry profit may be largest in a hybrid pricing regime, in which the manufacturer forgoes the use of personalized pricing and only the retailer charges personalized prices.

Download or read book Personalized Pricing and Competition written by Andrew Rhodes and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Personalized Pricing as Monopolization written by Ramsi Woodcock and published by . This book was released on 2019 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: The advance of the information age will allow firms to engage in personalized pricing, a form of price discrimination that is profitable for firms, but unambiguously harmful to consumers. Antitrust can protect consumers from personalized pricing--also called perfect price discrimination--by condemning the steps firms must take to prevent resellers from undermining firms' personalized pricing schemes. To personalize prices successfully, a firm must prevent those to whom the firm wishes to charge low prices from reselling the product to those to whom the firm wishes to charge high prices. Otherwise, resellers will compete away any difference in prices. But such steps amount to conduct that harms competitors--here, resellers--and ultimately the consumers who pay the personalized prices that result. A firm that personalizes prices must therefore do the three things that together constitute illegal monopolization under Section 2 of the Sherman Act: harm competition, and consumers, in order profitably to raise prices. The right to refuse to deal with competitors, which would normally exempt this conduct from antitrust scrutiny, does not apply to personalized pricing because an available remedy--an order prohibiting personalized pricing, but not forcing firms to sell to resellers--does not lead to the forced sharing and judicial price administration that the right to refuse to deal is meant to avoid.

Download or read book Personalized Pricing and Advertising written by Simon P. Anderson and published by . This book was released on 2015 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study personalized price competition with costly advertising among n quality-cost differentiated firms. Strategies involve mixing over both prices and whether to advertise. In equilibrium, only the top two firms advertise, earning "Bertrand-like" profits. Welfare losses initially rise then fall with the ad cost, with losses due to excessive advertising and sales by the "wrong" firm. When firms are symmetric, the symmetric equilibrium yields perverse comparative statics and is unstable. Our key results apply when demand is elastic, when ad costs are heterogeneous, and with noise in consumer tastes.

Download or read book Behavior based Personalized Pricing when Firms Can Share Customer Information written by Chongwoo Choe and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book A Blessing Or a Curse The Implications of Consumers Aversion on Personalized Pricing written by Xin Zhang and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Personalised Pricing A comprehensive and critical examination of first degree price discrimination written by and published by GRIN Verlag. This book was released on 2021-07-09 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Data Driven Innovation Big Data for Growth and Well Being written by OECD and published by OECD Publishing. This book was released on 2015-10-06 with total page 456 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report improves the evidence base on the role of Data Driven Innovation for promoting growth and well-being, and provide policy guidance on how to maximise the benefits of DDI and mitigate the associated economic and societal risks.

Download or read book Glossary of Industrial Organisation Economics and Competition Law written by Organisation for Economic Co-operation and Development and published by Organisation for Economic Co-operation and Development; Washington, D.C. : OECD Publications and Information Centre. This book was released on 1993 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Personalized Pricing with Imperfect Customer Recognition written by Stefano Colombo and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Voluntary Disclosure and Personalized Pricing written by S. Nageeb Ali and published by . This book was released on 2019 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: A concern central to the economics of privacy is that firms may use consumer data to price discriminate. A common response is that consumers should have control over their data and the ability to choose how firms access it. Since firms draw inferences based on both the data seen as well as the consumer's disclosure choices, the strategic implications of this proposal are unclear. We investigate whether such measures improve consumer welfare in monopolistic and competitive environments. We find that consumer control can guarantee gains for every consumer type relative to both perfect price discrimination and no personalized pricing. This result is driven by two ideas. First, consumers can use disclosure to amplify competition between firms. Second, consumers can share information that induces a seller--even a monopolist--to make price concessions. Furthermore, whether consumer control improves consumer surplus depends on both the technology of disclosure and the competitiveness of the marketplace. In a competitive market, simple disclosure technologies such as "track / do-not-track" suffice for guaranteeing gains in consumer welfare. However, in a monopolistic market, welfare gains require richer forms of disclosure technology whereby consumers can decide how much information they would like to convey.

Download or read book Personalized Pricing and Consumer Welfare written by Jean-Pierre Dubé and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Download or read book Virtual Competition written by Ariel Ezrachi and published by Harvard University Press. This book was released on 2016-11-14 with total page 365 pages. Available in PDF, EPUB and Kindle. Book excerpt: “A fascinating book about how platform internet companies (Amazon, Facebook, and so on) are changing the norms of economic competition.” —Fast Company Shoppers with a bargain-hunting impulse and internet access can find a universe of products at their fingertips. But is there a dark side to internet commerce? This thought-provoking exposé invites us to explore how sophisticated algorithms and data-crunching are changing the nature of market competition, and not always for the better. Introducing into the policy lexicon terms such as algorithmic collusion, behavioral discrimination, and super-platforms, Ariel Ezrachi and Maurice E. Stucke explore the resulting impact on competition, our democratic ideals, our wallets, and our well-being. “We owe the authors our deep gratitude for anticipating and explaining the consequences of living in a world in which black boxes collude and leave no trails behind. They make it clear that in a world of big data and algorithmic pricing, consumers are outgunned and antitrust laws are outdated, especially in the United States.” —Science “A convincing argument that there can be a darker side to the growth of digital commerce. The replacement of the invisible hand of competition by the digitized hand of internet commerce can give rise to anticompetitive behavior that the competition authorities are ill equipped to deal with.” —Burton G. Malkiel, Wall Street Journal “A convincing case for the need to rethink competition law to cope with algorithmic capitalism’s potential for malfeasance.” —John Naughton, The Observer