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Strategic loyalty reward in dynamic price Discrimination

Author

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  • Bernard Caillaud

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • Romain de Nijs

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper proposes a dynamic model of duopolistic competition under behaviorbased price discrimination with the following property: in equilibrium, a firm may reward its previous customers although long term contracts are not enforceable. A firm can offer a lower price to its previous customers than to its new customers as a strategic means to hamper its rival to gather precise information on the young generation of customers for subsequent profitable behavior-based pricing. The result holds both with myopic and forward-looking, impatient enough consumers.

Suggested Citation

  • Bernard Caillaud & Romain de Nijs, 2011. "Strategic loyalty reward in dynamic price Discrimination," Working Papers halshs-00622291, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00622291
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00622291
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. De Nijs, Romain & Rhodes, Andrew, 2013. "Behavior-based pricing with experience goods," Economics Letters, Elsevier, vol. 118(1), pages 155-158.
    2. Rosa‐Branca Esteves & Helder Vasconcelos, 2015. "Price Discrimination under Customer Recognition and Mergers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 523-549, September.
    3. Brokesova, Zuzana & Deck, Cary & Peliova, Jana, 2014. "Experimenting with purchase history based price discrimination," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 229-237.
    4. Zuzana Brokesova & Cary Deck & Jana Peliova, 2014. "Experimenting with Behavior Based Pricing," Working Papers 14-12, Chapman University, Economic Science Institute.

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    Keywords

    Price discrimination; Dynamic pricing; Loyalty reward;
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