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

Rosa Esteves (), Qihong Liu () and Jie Shuai

No 04/2021, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: Firms commonly price discriminate across consumers based on purchase history, a practice known as behavior-based price discrimination (BBPD). Existing studies usually assume that consumer preferences follow uniform distribution, and find that BBPD benefits consumers at the cost of firms, prisoners’ dilemma. In this paper, we consider a class of consumer preferences distribution and show that new profit and welfare results arise. In particular, when consumer preferences are sufficiently clustered at the center of the market (e.g. triangular distribution), BBPD boosts industry profits at the expense of consumers. This is opposite to the standard prisoners’ dilemma results under uniform distribution. On the other hand, when consumer preferences are not clustered at the center of the market, the usual findings prevail. Our results highlight the important role of the shape of preferences and provide useful implications for relevant players including managers, regulators and consumer advocates.

Date: 2021
New Economics Papers: this item is included in nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://repositorium.sdum.uminho.pt/bitstream/1822/72593/1/WP%2004.2021.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 (2019)
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:nip:nipewp:4/2021

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in NIPE Working Papers from NIPE - Universidade do Minho Núcleo de Investigação em Políticas Económicas e Empresariais, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal. Contact information at EDIRC.
Bibliographic data for series maintained by NIPE ().