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Behavior-based pricing with experience goods

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Author Info

  • De Nijs, Romain
  • Rhodes, Andrew

Abstract

We consider a two-period model in which duopolists sell experience goods and practice behavior-based price discrimination (BBPD). We give general conditions for when firms should offer a lower price to existing customers (‘pay-to-stay’) or to new customers (‘pay-to-switch’). We also demonstrate that unlike previous results, BBPD may intensify competition in the first period but weaken it in the second.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 118 (2013)
Issue (Month): 1 ()
Pages: 155-158

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Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:155-158

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Dynamic pricing; Price discrimination; Experience goods; Skewness;

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References

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  1. J. Miguel Villas-Boas, 2004. "Consumer Learning, Brand Loyalty, and Competition," Marketing Science, INFORMS, vol. 23(1), pages 134-145, December.
  2. J. Miguel Villas-Boas, 2006. "Dynamic Competition with Experience Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 37-66, 03.
  3. Jiwoong Shin & K. Sudhir, 2010. "A Customer Management Dilemma: When Is It Profitable to Reward One's Own Customers?," Marketing Science, INFORMS, vol. 29(4), pages 671-689, 07-08.
  4. Bernard Caillaud & Romain De Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," PSE Working Papers halshs-00622291, HAL.
  5. repec:hal:wpaper:halshs-00622291 is not listed on IDEAS
  6. Bing Jing, 2011. "Pricing Experience Goods: The Effects of Customer Recognition and Commitment," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 451-473, 06.
  7. Yongmin Chen, 1997. "Paying Customers to Switch," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(4), pages 877-897, December.
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