Pricing with customer recognition

Rosa Esteves ()

International Journal of Industrial Organization, 2010, vol. 28, issue 6, 669-681

Abstract: This article studies the dynamic effects of behaviour-based price discrimination and customer recognition in a duopolistic market where the distribution of consumers' preferences is discrete. Consumers are myopic and firms are forward looking. In the static and first-period equilibrium firms choose prices with mixed strategies. When price discrimination is allowed, forward-looking firms have an incentive to avoid customer recognition, thus the probability that both will have positive first-period sales decreases as they become more patient. Furthermore, an asymmetric equilibrium sometimes exists, yielding a 100-0 division of the first-period sales. As a whole, price discrimination is bad for profits but good for consumer surplus and welfare.

Keywords: Competitive; behaviour-based; price; discrimination; Discrete; distribution; of; consumer; preferences; Economic; effects (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (79)

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Related works:
Working Paper: Pricing with Customer Recognition (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:28:y:2010:i:6:p:669-681

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