Pricing with Customer Recognition

Rosa Esteves ()

No 27/2007, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: This article studies the dynamic effects of behaviour-base price discrimination and customer recognition in a duopolistic market where the distribution of consumers' preferences is discrete. In the static and firs-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.

Date: 2007
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
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Citations: View citations in EconPapers (4)

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Journal Article: Pricing with customer recognition (2010)
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