Personalized pricing with persuasive advertising and the value of consumer information: a duopoly framework

Lei Yan (), Yuxiang Zhang (), Shue Mei () and Weijun Zhong ()
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Lei Yan: Southeast University
Yuxiang Zhang: Southeast University
Shue Mei: Southeast University
Weijun Zhong: Southeast University

Electronic Commerce Research, 2024, vol. 24, issue 3, No 4, 1533-1562

Abstract: Abstract This paper studies the effects of persuasive advertising and personalized pricing on duopolistic firms’ profits, consumer surplus and social welfare when one or two firms adopt consumer information to personalized pricing. With a game-theoretic model, the main results are summarized as follows: (1) The profits of both firms when they use consumer information are lower than those when neither of them use consumer information. (2) Consumer surplus increases with the number of firms who collect and use consumer information. Compared with the case that one or no firms have consumer information, the social welfare in the case that both firms have consumer information is the highest. (3) Given both firms adopt persuasive advertising simultaneously, the two firms will trap into “prisoner’s dilemma” when they decide whether to use consumer information or not. (4) In the duopolistic competition, the optimal strategy for data intermediary is to sell information to only one firm.

Keywords: Persuasive advertising; Consumer information; Personalized pricing; Consumer information value; Duopolistic competition (search for similar items in EconPapers)
JEL-codes: D43 D8 L13 L15 L5 M37 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10660-022-09568-2

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