Personalized prices in a delivered pricing model with a price sensitive demand

Rosa Branca Esteves () and Jie Shuai
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Rosa Branca Esteves: Universidade do Minho and NIPE

No 1/2022, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This paper provides a first assessment of the profit and welfare effects of firms’ ability to charge personalized prices where consumer demand is sensitive to price changes. In a mill pricing model, regardless of demand elasticity, personalized priicing (PP) raises consumer surplus at the expense of profits. In contrast, in a delivered pricing model, if demand is sufficiently elastic, PP boosts profits at the expense of consumer surplus and overall welfare. Moving from PP in a mill to a delivery pricing model, benefits industry profits and harms consumer surplus and welfare.

Date: 2022
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