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Should Firms Employ Personalized Pricing?

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  • Toshihiro Matsumura
  • Noriaki Matsushima

Abstract

type="main"> This paper theoretically considers a duopoly model in which all firms do not always employ personalized pricing. Our model incorporates the fact that firms engage in marginal cost-reducing activities after they decide whether to employ personalized pricing. When the ex ante cost difference between the firms is large, the less-efficient firm does not employ personalized pricing even when the fixed cost to do so is zero. This is because employing personalized pricing induces the rival firm to engage more in reducing its costs, which is more likely to harm the less-efficient firm.

Suggested Citation

  • Toshihiro Matsumura & Noriaki Matsushima, 2015. "Should Firms Employ Personalized Pricing?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(4), pages 887-903, October.
  • Handle: RePEc:bla:jemstr:v:24:y:2015:i:4:p:887-903
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    File URL: http://hdl.handle.net/10.1111/jems.12109
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    1. Neeraj Arora & Xavier Dreze & Anindya Ghose & James Hess & Raghuram Iyengar & Bing Jing & Yogesh Joshi & V. Kumar & Nicholas Lurie & Scott Neslin & S. Sajeesh & Meng Su & Niladri Syam & Jacquelyn Thom, 2008. "Putting one-to-one marketing to work: Personalization, customization, and choice," Marketing Letters, Springer, vol. 19(3), pages 305-321, December.
    2. Curtis R. Taylor, 2004. "Consumer Privacy and the Market for Customer Information," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 631-650, Winter.
    3. Qihong Liu & Konstantinos Serfes, 2004. "Quality of Information and Oligopolistic Price Discrimination," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 671-702, December.
    4. Matsumura Toshihiro & Matsushima Noriaki, 2010. "When Small Firms Fight Back Against Large Firms in R&D Activities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-42, September.
    5. Junichiro Ishida & Toshihiro Matsumura & Noriaki Matsushima, 2011. "Market Competition, R&D And Firm Profits In Asymmetric Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 59(3), pages 484-505, September.
    6. Shaffer, G. & Zhang, Z.J., 1994. "Competitive Coupon Targeting," Papers 94-02, Michigan - Center for Research on Economic & Social Theory.
    7. Anindya Ghose & Vidyanand Choudhary & Tridas Mukhopadhyay & Uday Rajan, 2002. "Personalized Pricing and Quality Differentiation on the Internet," Review of Marketing Science Working Papers 2-1-1005, Berkeley Electronic Press.
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    Cited by:

    1. repec:ebl:ecbull:eb-18-00335 is not listed on IDEAS
    2. Arturo Garcia & Mariel Leal & Sang-Ho Lee, 2018. "Social responsibility in a bilateral monopoly with R&D," Economics Bulletin, AccessEcon, vol. 38(3), pages 1467-1475.
    3. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2018. "Selling Strategic Information in Digital Competitive Markets," Working Papers hal-01794886, HAL.
    4. Chongwoo Choe & Stephen King & Noriaki Matsushima, 2017. "Pricing with Cookies: Behavior-Based Price Discrimination and Spatial Competition," Monash Economics Working Papers 07-17, Monash University, Department of Economics.
    5. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2018. "Selling Strategic Information in Digital Competitive Markets," CESifo Working Paper Series 7078, CESifo Group Munich.
    6. Jullien, Bruno & Reisinger, Markus & Rey, Patrick, 2019. "Personalized Pricing and Brand Distribution," TSE Working Papers 19-995, Toulouse School of Economics (TSE).
    7. Zhijun Chen & Chongwoo Choe & Noriaki Matsushima, 2018. "Competitive Personalized Pricing," ISER Discussion Paper 1023, Institute of Social and Economic Research, Osaka University.
    8. repec:eee:indorg:v:63:y:2019:i:c:p:239-282 is not listed on IDEAS

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