Personalized pricing with a price sensitive demand

Rosa Esteves () and Jie Shuai

Economics Letters, 2022, vol. 213, issue C

Abstract: This paper assesses the profit and welfare effects of firms’ ability to charge personalized prices in markets where consumer demand is sensitive to price changes. In a mill pricing model, regardless of demand elasticity, personalized pricing (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 delivered pricing model, benefits industry profits and harms consumer surplus and welfare.

Keywords: Personalized pricing; Delivered pricing; Mill pricing; CES demand (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:213:y:2022:i:c:s0165176522000672

DOI: 10.1016/j.econlet.2022.110396

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