Targeted Pricing and Vertical Structure

Ryo Masuyama

No DP2025-13, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Targeted pricing is an aggressive strategy to steal demand from rivals. Therefore, it is believed that firms should employ it. However, targeted pricing has rarely been observed. There is a gap between our perceptions in the literature on targeted pricing and reality. This study demonstrates the negative aspects of targeted pricing by considering supply chain competition. When a rival supply chain is vertically separated, targeted pricing lowers the rival’s input price and intensifies competition. Conversely, when the rival firm is vertically integrated, this effect does not occur. Therefore, a firm should confirm its rival's vertical structure when deciding whether to employ targeted pricing.

Keywords: Targeted pricing; Uniform pricing; Vertical structure; Supply chain management; Hotelling model (search for similar items in EconPapers)
JEL-codes: D43 L10 L13 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2025-06
New Economics Papers: this item is included in nep-com and nep-mic
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