Hiding or disclosing? Information discrimination in member-only discounts

Li Hu, Hoi-Lam Ma, Li Wang and Yang Liu

Transportation Research Part E: Logistics and Transportation Review, 2023, vol. 171, issue C

Abstract: E-commerce platforms commonly offer price discounts as a loyalty benefit for fee-based members. Some of them disclose the member-only discount, while others strategically hide the specific discount information from non-members, which can be seen as information discrimination between non-members and members. This paper constructs a stylized model to examine whether disclosing or hiding member-only discounts yields higher revenue. Our study also incorporates the two-sided reference price effects into customers’ utility formation to reveal how information discrimination works. By comparing the revenue gap between information disclosing and hiding strategies concerning exogenous and endogenous member-only discounts, we find that platforms that aim at the high-end market by charging a higher product price and membership fee and whose target customers hold higher negative but lower positive reference price effect should implement the information hiding strategy. The findings guide e-commerce platforms to improve revenue by strategically hiding or disclosing member-only discounts in fee-based membership management.

Keywords: Member operations; E-commerce platform; Information discrimination; Reference price effect; Fee-based membership (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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DOI: 10.1016/j.tre.2023.103026

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