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Contidioning Prices on Purchase History

Author

Listed:
  • Alessandro Acquisti

    (UC Berkeley)

  • Hal R. Varian

    (UC Berkeley)

Abstract

Many transactions are now computer mediated, making it possible for sellers to condition their pricing on the history of interactions with individual consumers. This paper investigates conditions under which price conditioning will or will not be used. Our simplest model involves rational consumers with constant valuations for the good being sold and a monopoly seller who can commit to a pricing policy. In this framework, the seller will not find it profitable to condition pricing on past behavior. We consider various generalizations of this model, such as allowing the seller to offer enhanced services to previous customers, making the seller unable to commit to a pricing policy, and allowing competition in the marketplace. All of these generalizations have equilibria with price conditioning.

Suggested Citation

  • Alessandro Acquisti & Hal R. Varian, 2002. "Contidioning Prices on Purchase History," Microeconomics 0210001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0210001
    Note: Type of Document - Latex; prepared on PC; pages: 39
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    More about this item

    Keywords

    Price discrimination; Price conditioning; Privacy; Ecommerce;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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