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Pricing with customer recognition

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Author Info

  • Esteves, Rosa-Branca

Abstract

This article studies the dynamic effects of behaviour-based price discrimination and customer recognition in a duopolistic market where the distribution of consumers' preferences is discrete. Consumers are myopic and firms are forward looking. In the static and first-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.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 28 (2010)
Issue (Month): 6 (November)
Pages: 669-681

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Handle: RePEc:eee:indorg:v:28:y:2010:i:6:p:669-681

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Web page: http://www.elsevier.com/locate/inca/505551

Related research

Keywords: Competitive behaviour-based price discrimination Discrete distribution of consumer preferences Economic effects;

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References

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  17. Rosa Branca Esteves, 2009. "A Survey on the Economics of Behaviour-Based Price Discrimination," NIPE Working Papers 5/2009, NIPE - Universidade do Minho.
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Citations

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Cited by:
  1. Esteves, Rosa Branca & Vasconcelos, Helder, 2010. "Price Discrimination under Customer Recognition and Mergers," CEPR Discussion Papers 7683, C.E.P.R. Discussion Papers.
  2. Rosa-Branca Esteves & Sofia Cerqueira, 2014. "Behaviour-Based Price Discrimination under Advertising and Imperfectly Informed Consumers," NIPE Working Papers 08/2014, NIPE - Universidade do Minho.
  3. Rosa Branca Esteves, 2010. "Price Discrimination with Private and Imperfect Information," NIPE Working Papers 3/2010, NIPE - Universidade do Minho.
  4. Rosa Branca Esteves & Joana Resende, 2011. "Competitive Targeted Advertising with Price Discrimination," NIPE Working Papers 08/2011, NIPE - Universidade do Minho.
  5. Oz Shy & Rune Stenbacka, 2012. "Investment in customer recognition and information exchange," Working Papers 12-4, Federal Reserve Bank of Boston.
  6. Henry W. Chappell & Paulo Guimarães & Orgül Demet Öztürk, 2011. "Confessions of an internet monopolist: demand estimation for a versioned information good," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 32(1), pages 1-15, January.
  7. Rosa Branca Esteves, 2009. "A Survey on the Economics of Behaviour-Based Price Discrimination," NIPE Working Papers 5/2009, NIPE - Universidade do Minho.
  8. Bernard Caillaud & Romain De Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," PSE Working Papers halshs-00622291, HAL.
  9. Rosa-Branca Esteves, 2014. "Behaviour-Based Price Discrimination with Retention Offers," NIPE Working Papers 09/2014, NIPE - Universidade do Minho.
  10. Thomas Gehrig & Oz Shy & Rune Stenbacka, 2012. "A Welfare Evaluation of History-Based Price Discrimination," Journal of Industry, Competition and Trade, Springer, vol. 12(4), pages 373-393, December.
  11. repec:hal:wpaper:halshs-00622291 is not listed on IDEAS
  12. Rosa Branca Esteves, 2013. "Customer Poaching with Retention Strategies," NIPE Working Papers 02/2013, NIPE - Universidade do Minho.
  13. Esteves, Rosa-Branca & Reggiani, Carlo, 2014. "Elasticity of demand and behaviour-based price discrimination," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 46-56.

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