Personalized Pricing with Imperfect Customer Recognition

Stefano Colombo (), Clara Graziano and Aldo Pignataro

No 10455, CESifo Working Paper Series from CESifo

Abstract: 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.

Keywords: personalized pricing; price discrimination; privacy; margins of information (search for similar items in EconPapers)
JEL-codes: D43 D80 L10 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10455

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