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Personalized prices in a delivered pricing model with a price sensitive demand

Author

Listed:
  • Rosa Branca Esteves

    (Universidade do Minho and NIPE)

  • Jie Shuai

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

Abstract

This paper provides a first assessment of the profit and welfare effects of firms’ ability to charge personalized prices where consumer demand is sensitive to price changes. In a mill pricing model, regardless of demand elasticity, personalized priicing (PP) raises consumer surplus at the expense of profits. In contrast, in a delivered pricing model, if demand is sufficiently elastic, PP boosts profits at the expense of consumer surplus and overall welfare. Moving from PP in a mill to a delivery pricing model, benefits industry profits and harms consumer surplus and welfare.

Suggested Citation

  • Rosa Branca Esteves & Jie Shuai, 2022. "Personalized prices in a delivered pricing model with a price sensitive demand," NIPE Working Papers 1/2022, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:1/2022
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    File URL: http://repositorium.sdum.uminho.pt/handle/1822/75844
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    Cited by:

    1. Esteves, Rosa-Branca, 2022. "Can personalized pricing be a winning strategy in oligopolistic markets with heterogeneous demand customers? Yes, it can," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    2. Qiuyu Lu & Noriaki Matsushima, 2024. "Personalized Pricing When Consumers Can Purchase Multiple Items," Journal of Industrial Economics, Wiley Blackwell, vol. 72(4), pages 1507-1524, December.
    3. Foros, Øystein & Kind, Hans Jarle & Nguyen-Ones, Mai, 2024. "The choice of pricing format: Firms may choose uniform pricing over personalized pricing to induce rivals to soften competition," Information Economics and Policy, Elsevier, vol. 66(C).
    4. Noriaki Matsushima & Tomomichi Mizuno & Cong Pan, 2023. "Personalized pricing with heterogeneous mismatch costs," Southern Economic Journal, John Wiley & Sons, vol. 90(2), pages 369-388, October.
    5. Noriaki Matsushima & Mark J. Tremblay, 2024. "Network compatibility and incumbent pricing regimes," ISER Discussion Paper 1265, Institute of Social and Economic Research, The University of Osaka.
    6. Wen-Chung Guo & Fu-Chuan Lai, 2024. "Urban/rural spatial price discrimination with online competition," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 73(1), pages 323-361, June.
    7. Qiuyu Lu & Noriaki Matsushima & Shiva Shekhar, 2024. "Welfare Implications of Personalized Pricing in Competitive Platform Markets: The Role of Network Effects," CESifo Working Paper Series 10994, CESifo.
    8. Esteves, Rosa-Branca & Carballo-Cruz, Francisco, 2023. "Can data openness unlock competition when an incumbent has exclusive data access for personalized pricing?," Information Economics and Policy, Elsevier, vol. 64(C).

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