Personalized Pricing and Competition

Andrew Rhodes and Jidong Zhou ()
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Andrew Rhodes: Toulouse School of Economics

No 2329, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We study personalized pricing (or first-degree price discrimination) in a general oligopoly model. In the short-run, when the market structure is fixed, the impact of personalized pricing hinges on the degree of market coverage (i.e., how many consumers buy). If coverage is high (e.g., because the production cost is low, or the number of firms is large), personalized pricing intensifies competition and so harms firms but benefits consumers, whereas the opposite is true if coverage is low. However in the long-run, when the market structure is endogenous, personalized pricing always benefits consumers because it induces the socially optimal level of firm entry. We also study the asymmetric case where some firms can use consumer data to price discriminate while others cannot, and show it can be worse for consumers than when either all or no firms can personalize prices.

Keywords: personalized pricing; competition; price discrimination; consumer data (search for similar items in EconPapers)
Pages: 50 pages
Date: 2022-05
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: Personalized Pricing and Competition (2024)
Working Paper: Personalized Pricing and Competition (2022)
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