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Personalized pricing versus history-based pricing: implications for privacy policy

Topi Miettinen () and Rune Stenbacka

Information Economics and Policy, 2015, vol. 33, issue C, 56-68

Abstract: We compare personalized and history-based pricing and show that personalized pricing harms consumer surplus and total welfare when evaluated over a two-period horizon. The model is characterized by two key features: (1) the discounted two-period profits are invariant to whether personalized or history-based pricing is applied because higher period-2 profits with personalized pricing are offset by lower period-1 profits. (2) Consumer mobility is invariant to whether history-based or personalized pricing is applied, but personalized pricing leads to a higher proportion of inefficient switching, and a lower proportion of efficient switching.

Keywords: Personalized pricing; History-based pricing; Customer recognition; Price discrimination; Privacy; Switching cost (search for similar items in EconPapers)
JEL-codes: D43 L13 L40 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:33:y:2015:i:c:p:56-68

DOI: 10.1016/j.infoecopol.2015.10.003

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