Purchase history and product personalization

Vasiliki Skreta and Laura Doval

No 15969, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Product personalization opens the door to price discrimination. A rich product line allows for higher consumer satisfaction, but the mere choice of a product carries valuable information about the consumer that the firm can leverage for price discrimination. Controlling the degree of product personalization provides the firm with an additional tool to curb ratcheting forces arising from consumers’ awareness of being price discriminated. Indeed, a firm's inability to not engage in price discrimination introduces a novel distortion: The firm offers a subset of the products that it would offer if, instead, the firm could commit to not price discriminate. Doing so gives commitment power to the firm: By ‘pooling’ consumers with different tastes to the same variety the firm commits not to learn their tastes.

Keywords: Product-line design; Price discrimination; Dynamic mechanism design; Information design; Limited commitment (search for similar items in EconPapers)
JEL-codes: D84 D86 L12 L13 L15 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Purchase history and product personalization (2023)
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