Personalized Pricing and Distribution Strategies
Bruno Jullien,
Markus Reisinger and
Patrick Rey
No 17139, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
The availability of consumer data is inducing a growing number of firms to adopt more personalized pricing policies. This affects both the performance of, and the competition between alternative distribution channels, which in turn has implications for firms' distribution strategies. We develop a formal model to examine a brand manufacturer's choice between mono distribution (selling only through its own direct channel) or dual distribution (selling through an independent retailer as well). We consider different demand patterns, covering both horizontal and vertical differentiation and different pricing regimes, with the manufacturer and retailer each charging personalized prices or a uniform price. We show that dual distribution is optimal for a large number of cases. In particular, this is always the case when the channels are horizontally differentiated, regardless of the pricing regime; moreover, if both firms charge personalized prices, a well-designed wholesale tariff allows them to extract the entire consumer surplus. These insights obtained here for the case of intra-brand competition between vertically related firms are thus in stark contrast to those obtained for inter-brand competition, where personalized pricing dissipates industry profit. With vertical differentiation, dual distribution remains optimal if the manufacturer charges a uniform price. By contrast, under personalized pricing mono distribution can be optimal when the retailer does not expand demand sufficiently. Interestingly, the industry profit may be largest in a hybrid pricing regime, in which the manufacturer forgoes the use of personalized pricing and only the retailer charges personalized prices.
Keywords: Personalized pricing; Distribution strategies; Vertical contracting; Downstream competition (search for similar items in EconPapers)
JEL-codes: L22 L24 L81 (search for similar items in EconPapers)
Date: 2022-03
References: Add references at CitEc
Citations:
Downloads: (external link)
https://cepr.org/publications/DP17139 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Journal Article: Personalized Pricing and Distribution Strategies (2023) 
Working Paper: Personalized Pricing and Distribution Strategies (2023) 
Working Paper: Personalized Pricing and Distribution Strategies (2022) 
Working Paper: Personalized Pricing and Distribution Strategies (2022) 
Working Paper: Personalized Pricing and Distribution Strategies (2022) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:17139
Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP17139
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().