Behavior-Based Price Discrimination with Non-Uniform Distribution of Consumer Preferences

Rosa Esteves (), Qihong Liu and Jie Shuai

No 18/2019, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This paper provides useful implications for managers and marketing practitioners using data on consumersípurchase history for price discrimination purposes. It is also useful for competition policy agencies and consumer advocates. It highlights that the shape of preferences plays an important role to the understanding of the proÖt and welfare e§ects of this business practice. We depart from the existing literature, by assuming that the distribution of consumer preferences is non-uniform. We show that new proÖt and welfare results arise. In contrast to what happens under uniform preferences, we show that if consumer preferences are clustered at the centre of the market (e.g. triangle distribution), in comparison to uniform pricing, BBPD boosts industry proÖts at the expense of consumer welfare. We show that if consumer preferences approach a non-uniform reverse triangle, the standard results prevail.

Keywords: Price discrimination based on purchase history; proÖt and welfare e§ects; competition policy; distribution of consumer preferences (search for similar items in EconPapers)
JEL-codes: D43 L13 M31 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com
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http://repositorium.sdum.uminho.pt/bitstream/1822/63817/4/NIPE_WP_18_2019.pdf (application/pdf)

Related works:
Journal Article: Behavior‐based price discrimination with nonuniform distribution of consumer preferences (2022)
Working Paper: Behavior-Based Price Discrimination with Non-Uniform Distribution of Consumer Preferences (2021)
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