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Behavior-Based Price Discrimination in a Multi-Dimensional Preferences Market

Author

Listed:
  • Rosa-Branca Esteves

    (Universidade do Minho - NIPE)

  • Qihong Liu

    (Department of Economics, University of Oklahoma, USA)

  • Jie Shuai

    (Wenlan School of Business, Zhongnan University of Economics and Law, China)

Abstract

This article is a fir rst look at the profi t and welfare effects of behavior-based price discrimination in a two-period multi-dimensional preferences model. Compared to one-dimensional models, we show that fi rms compete less aggressively in both periods and so new results are obtained. Specifically, under forward looking consumers and two symmetric dimensions, BBPD boosts industry profi ts at the expense of consumers. However, we show that the standard one-dimensional welfare results can prevail under asymmetric dimensions and myopic consumers.

Suggested Citation

  • Rosa-Branca Esteves & Qihong Liu & Jie Shuai, 2016. "Behavior-Based Price Discrimination in a Multi-Dimensional Preferences Market," NIPE Working Papers 4/2016, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:4/2016
    as

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    File URL: http://www.nipe.eeg.uminho.pt/Uploads/WP_2016/NIPE_WP_04_2016.pdf
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    References listed on IDEAS

    as
    1. Esteves, Rosa-Branca, 2010. "Pricing with customer recognition," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 669-681, November.
    2. Drew Fudenberg & Jean Tirole, 2000. "Customer Poaching and Brand Switching," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 634-657, Winter.
    3. 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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    6. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
    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. Yongmin Chen & Jason Pearcy, 2010. "Dynamic pricing: when to entice brand switching and when to reward consumer loyalty," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 674-685, December.
    9. 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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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Multi-dimension; competitive price discrimination; customer recognition;
    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
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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