Research Note—The Benefits of Personalized Pricing in a Channel

Yunchuan Liu () and Z. John Zhang ()
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Yunchuan Liu: A. Gary Anderson Graduate School of Management, 900 University Avenue, University of California, Riverside, California 92521
Z. John Zhang: The Wharton School, University of Pennsylvania, 700 Jon M. Huntsman Hall, 3730 Walnut Street, Philadelphia, Pennsylvania 19104-6340

Marketing Science, 2006, vol. 25, issue 1, 97-105

Abstract: In this note, we explore channel interactions in an information-intensive environment where the retailer can implement personalized pricing and the manufacturer can leverage both personalized pricing and entry into a direct distribution channel. We study whether a retailer can benefit from personalized pricing and how upstream personalized pricing or entry into a direct distribution channel affects the allocation of channel profit. We find that the retailer is worse off because of its own or upstream personalized pricing, even when the retailer is a monopoly. However, it may still be optimal for the retailer to embrace personalized pricing in order to reap the strategic benefit of deterring the manufacturer from selling direct and targeting end consumers.

Keywords: channel management; personalized pricing; CRM; entry deterrence (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (92)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:25:y:2006:i:1:p:97-105

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