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Behaviour-Based Price Discrimination under Advertising and Imperfectly Informed Consumers

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This 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.Classification-JEL:

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  • Rosa-Branca Esteves & Sofia Cerqueira, "undated". "Behaviour-Based Price Discrimination under Advertising and Imperfectly Informed Consumers," NIPE Working Papers 08/2014, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:08/2014
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    1. Esteves, Rosa-Branca, 2010. "Pricing with customer recognition," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 669-681, November.
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    8. Chen, Yuxin & Zhang, Z. John, 2009. "Dynamic targeted pricing with strategic consumers," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 43-50, January.
    9. Rosa‐Branca Esteves & Helder Vasconcelos, 2015. "Price Discrimination under Customer Recognition and Mergers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 523-549, September.
    10. De Nijs, Romain, 2013. "Information provision and behaviour-based price discrimination," Information Economics and Policy, Elsevier, vol. 25(1), pages 32-40.
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    1. Kanying Liu & Yong Lan & Wei Li & Erbao Cao, 2019. "Behavior-Based Pricing of Organic and Conventional Agricultural Products Based on Green Subsidies," Sustainability, MDPI, vol. 11(4), pages 1-16, February.

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