Author: Sumit ShrivastavPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Profitability of Behavior Based Price Discrimination
Author: Sumit ShrivastavBehavior-Based Price Discrimination with Experience Goods
Author: Hoe Sang ChungPublisher:
ISBN:
Category :
Languages : en
Pages : 0
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.
Behavior-Based Price Discrimination with a General Demand
Author: Rosa Branca EstevesPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
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.
Price Discrimination
Author: Fouad SabryPublisher: One Billion Knowledgeable
ISBN:
Category : Business & Economics
Languages : en
Pages : 374
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.
Behavior-Based Pricing
Author: Krista J. LiPublisher:
ISBN:
Category :
Languages : en
Pages : 37
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.
Recent Advances in the Theory of Third-Degree Price Discrimination
Author: Takanori AdachiPublisher: Springer Nature
ISBN: 981993205X
Category : Business & Economics
Languages : en
Pages : 85
Book Description
This book provides an updated overview of the recent progress in the theoretical study of third-degree price discrimination. It is a marketing tactic and is said to be present if the unit price is different across different groups of buyers. Its welfare evaluation is often difficult because it entails two countervailing effects: on one hand, it exploits surplus from consumers who have high willingness-to-pay, but on the other hand, it generates gains from trade from consumers who otherwise would not purchase the good. Recognizing this difficulty, we provide new insights on evaluation of third-degree price discrimination in consideration of network effects and vertical product differentiation. Our analysis is particularly useful for the industries related to information and communication technologies (ICT) because these two elements characterize them. Furthermore, we also study the welfare effects of third-degree price discrimination under imperfect competition other than monopoly. At first, it seems that it may complicate the analysis under monopoly. However, we argue that the main thrusts of analysis under monopoly carry over to the case of oligopoly. We also take into account behavioral aspects and their implications for studying third-degree price discrimination. Overall, this book is designed to provide implications for contemporary management and policy issues by advancing theoretical issues in industrial organization.
Imperfect Behavior-Based Price Discrimination
Author: Stefano ColomboPublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
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.
Behavioral Price Discrimination in the Presence of Switching Costs
Author: Koray CosgunerPublisher:
ISBN:
Category :
Languages : en
Pages : 25
Book Description
We study the strategic impacts of behavioral price discrimination (BPD) on manufacturers and retailers in a distribution channel when there are switching costs in consumer demand. Unlike previous empirical studies of behavioral price discrimination, which rely only on differences in price elasticity across customers, our pricing model allows the firm strategies to additionally account for differences in price elasticity across time (due to switching costs). We estimate a dynamic pricing model using empirical data from the cola category and, through a series of counterfactuals, we find that the retailer should simply outsource the data analytics and customization of coupons to manufacturers and improve its profit beyond what it can achieve by proactively couponing on its own. We further find that serving as an information broker to sell its customer database to manufacturers can be a vital source of profit to the retailer. In contrast, manufacturers end up worse off, illustrating that customer information is a potent source of channel power to the retailer. Finally, we show that simply using customers' most recent purchase information can significantly impact firms' profits. BPD based on this information is easy to implement and of low cost to manufacturers and retailers.
Economics and Information Systems
Author: Terrence HendershottPublisher: Elsevier Science Limited
ISBN: 9780444517715
Category : Business & Economics
Languages : en
Pages : 692
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.
Behavior- and Characteristic-Based Price Discrimination
Author: Stefano ColomboPublisher:
ISBN:
Category :
Languages : en
Pages : 0
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.