Personalized Pricing and the Value of Past Purchase Histories: An Empirical Perspective

Isis Durrmeyer, Jean-François Fournel and Mario Samano

No 26-1779, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Grocery loyalty programs record purchase histories that retailers do not use to personalize prices. We measure how much they forgo with a structural model of demand and pricing in which a Bayesian seller learns preferences from past purchases and personalizes prices. Profits rise by 7.1% with one-year histories, capturing two thirds of the gains under perfect knowledge of preferences. Most consumers (84.1%) gain, but the losses of the minority outweigh these gains, and aggregate consumer surplus falls. An optimal loyalty program charges a membership fee, yet most consumers enroll, because opting out signals price insensitivity.

Keywords: personalized pricing; behavior-based price discrimination; purchase histories; Bayesian learning; loyalty programs; value of information (search for similar items in EconPapers)
JEL-codes: D12 D42 D83 L11 L81 (search for similar items in EconPapers)
Date: 2026-10-12
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:132271

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