A Welfare Evaluation of History-Based Price Discrimination

Thomas Gehrig, Oz Shy and Rune Stenbacka ()

Journal of Industry, Competition and Trade, 2012, vol. 12, issue 4, 373-393

Abstract: We design an asymmetric duopoly model with inherited market dominance such that the dominant firm and the smaller firm can price discriminate based on consumers’ purchase history. We show that uniform pricing softens competition leading to higher industry profits than under history-based pricing. Consumers benefit from history-based price discrimination unless the switching cost is sufficiently high and the inherited degree of dominance is sufficiently weak. A ban on history-based pricing would typically introduce a distributional conflict between consumers and producers. Finally, we establish that the gains to industry profits associated with uniform pricing exceed the associated losses to consumers. Copyright Springer Science+Business Media, LLC 2012

Keywords: market dominance; history-based pricing; consumer loyalty; poaching; price discrimination; horizontal differentiation; D4; L1; L41 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://hdl.handle.net/10.1007/s10842-011-0111-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jincot:v:12:y:2012:i:4:p:373-393

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/10842/PS2

DOI: 10.1007/s10842-011-0111-8

Access Statistics for this article

Journal of Industry, Competition and Trade is currently edited by Karl Aiginger, Marcel Canoy and Michael Peneder

More articles in Journal of Industry, Competition and Trade from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().