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Behavior-Based Price Discrimination and Product Choice

Author

Listed:
  • Chongwoo Choe

    (Monash University)

  • Noriaki Matsushima

    (Osaka University)

Abstract

We study a two-period model of behavior-based price discrimination, as in Fudenberg and Tirole (RAND J Econ 31(4):634–657, 2000), but we allow firms to make their product choices in the first period. We show that the only possible equilibrium involves maximal differentiation. This is in contrast to Choe et al. (Manag Sci 64(12):5669–5687, 2018), where equilibrium features less-than-maximal differentiation when competition is in personalized pricing. Thus, our result highlights an important interplay between the type of price competition and product choice.

Suggested Citation

  • Chongwoo Choe & Noriaki Matsushima, 2021. "Behavior-Based Price Discrimination and Product Choice," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(2), pages 263-273, March.
    • Handle: RePEc:kap:revind:v:58:y:2021:i:2:d:10.1007_s11151-020-09783-x
    DOI: 10.1007/s11151-020-09783-x
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    Cited by:

    1. Okuyama, Suzuka, 2021. "Behavior-based Price Discrimination in the Domestic and International Mixed duopoly," MPRA Paper 110206, University Library of Munich, Germany.
    2. Antoine Dubus, 2023. "Behavior-Based Algorithmic Pricing," Working Papers hal-03269586, HAL.
    3. Chongwoo Choe & Noriaki Matsushima & Mark J. Tremblay, 2020. "Behavior-Based Personalized Pricing: When Firms Can Share Customer Information," ISER Discussion Paper 1083, Institute of Social and Economic Research, Osaka University.

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    More about this item

    Keywords

    Behavior-based price discrimination; Spatial competition; Product choice;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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