Behaviour-Based Price Discrimination under Advertising and Imperfectly Informed Consumers

Rosa-Branca Esteves (rbranca@eeg.uminho.pt) and Sofia Cerqueira
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Rosa-Branca Esteves: Universidade do Minho - NIPE, http://www.eeg.uminho.pt
Sofia Cerqueira: Universidade do Minho

No 08/2014, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This paper is a first look at the dynamic effects of BBPD in a horizontally differentiation product market, where firms need to invest in advertising to generate awareness. When a firm is able to recognize customers with different purchasing histories, it may send them targeted advertisements with different prices. In comparison to no discrimination, it is shown that firms reduce their advertising efforts, charge higher first period prices and lower second period prices. In comparison to no discrimination, in contrast to the profit and consumer welfare results obtained under full informed consumers, it is shown that BBPD boosts industry profits and harms consumers.Classification-JEL:

Keywords: Creation-Date:; 2014 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic and nep-mkt
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