Behaviour-Based Price Discrimination under Advertising and Imperfectly Informed Consumers
AbstractThis paper is a first look at the dynamic effects of BBPD in a horizontally differentiation product market, where firms need to invest in advertising to generate awareness. When a firm is able to recognize customers with different purchasing histories, it may send them targeted advertisements with different prices. In comparison to no discrimination, it is shown that firms reduce their advertising efforts, charge higher first period prices and lower second period prices. In comparison to no discrimination, in contrast to the profit and consumer welfare results obtained under full informed consumers, it is shown that BBPD boosts industry profits and harms consumers.
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Bibliographic InfoPaper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 08/2014.
Date of creation: 2014
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-05-04 (All new papers)
- NEP-COM-2014-05-04 (Industrial Competition)
- NEP-IND-2014-05-04 (Industrial Organization)
- NEP-MIC-2014-05-04 (Microeconomics)
- NEP-MKT-2014-05-04 (Marketing)
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