First Degree Price Discrimination Using Big Data
Second and 3rd degree price discrimination (PD) receive far more attention than 1st degree PD, i.e. person-specific pricing, because the latter requires previously unobtainable information on individuals’ willingness to pay. I show modern web behavior data reasonably predict Netflix subscription, far outperforming data available in the past. I then present a model to estimate demand and simulate outcomes had 1st degree PD been implemented. The model is structural, derived from canonical theory models, but resembles an ordered Probit, allowing methods for handling massive datasets. Simulations show using demographics alone to tailor prices raises profits by 0.14%. Including web browsing data increases profits by much more, 1.4%, increasingly the appeal of tailored pricing, and resulting in some consumers paying twice as much as others do for the exact same product. There is an updated version of this paper. Personalized Discrimination Using Big Data, working paper #108.
|Date of creation:||Aug 2013|
|Date of revision:||Sep 2013|
|Contact details of provider:|| Postal: MS032, P.O. Box 9110, Waltham, MA 02454-9110|
Web page: http://www.brandeis.edu/departments/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ben Shiller & Joel Waldfogel, 2011. "Music for a Song: An Empirical Look at Uniform Pricing and Its Alternatives," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 630-660, December.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Martin Feldstein, 1992.
"College Scholarship Rules and Private Saving,"
NBER Working Papers
4032, National Bureau of Economic Research, Inc.
- Nair, Harikesh S., 2006.
"Intertemporal Price Discrimination with Forward-Looking Consumers: Application to the US Market for Console Video-Games,"
1947, Stanford University, Graduate School of Business.
- Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics (QME), Springer, vol. 5(3), pages 239-292, September.
- Graddy, Kathryn & Hall, George, 2009.
"A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market,"
CEPR Discussion Papers
7315, C.E.P.R. Discussion Papers.
- Graddy, Kathryn & Hall, George, 2011. "A dynamic model of price discrimination and inventory management at the Fulton Fish Market," Journal of Economic Behavior & Organization, Elsevier, vol. 80(1), pages 6-19.
- Kathryn Graddy & George Hall, 2009. "A Dynamic Model of Price Discrimination and Inventory Management at the Fulton Fish Market," NBER Working Papers 15019, National Bureau of Economic Research, Inc.
- Chenghuan Sean Chu & Phillip Leslie & Alan Sorensen, 2011. "Bundle-Size Pricing as an Approximation to Mixed Bundling," American Economic Review, American Economic Association, vol. 101(1), pages 263-303, February.
- Wendy W. Moe & Peter S. Fader, 2004. "Dynamic Conversion Behavior at E-Commerce Sites," Management Science, INFORMS, vol. 50(3), pages 326-335, March.
- Alessandro Acquisti & Hal R. Varian, 2005.
"Conditioning Prices on Purchase History,"
INFORMS, vol. 24(3), pages 367-381, May.
- Alan L. Montgomery & Shibo Li & Kannan Srinivasan & John C. Liechty, 2004. "Modeling Online Browsing and Path Analysis Using Clickstream Data," Marketing Science, INFORMS, vol. 23(4), pages 579-595, November.
- Crawford, Gregory S & Shum, Matthew, 2007. "Monopoly Quality Degradation and Regulation in Cable Television," Journal of Law and Economics, University of Chicago Press, vol. 50(1), pages 181-219, February.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
When requesting a correction, please mention this item's handle: RePEc:brd:wpaper:58. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Leslie Yancich)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.