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The welfare effects of group and personalized pricing in markets with multi-unit buyers with a decreasing disutility cost in consumption

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  • Rosa-Branca Esteves

    (NIPE/Center for Research in Economics and Management, University of Minho, Portugal)

Abstract

This paper assesses the welfare effects of firms´ability to use data for group and personalized pricing in markets with unit (q = 1) and multi-unit demand consumers (q > 1). The "disutility cost" of not consuming the ideal good is a function of units purchased and can increase at a decreasing rate β Ꞓ [0,1] as consumption increases ( β is the elasticity of the disutility cost with respect to q): Group pricing (GP) and personalized pricing (PP) are compared to uniform pricing (UP). GP always boosts profits at the expense of consumers. When β = 0,PP reduces industry profits and boosts consumer welfare. The same happens when q is low and/or β is sufficiently high. In contrast, if heterogeneity in demand is sufficiently high and is sufficiently low, PP can enhance profits at the expense of consumer welfare.

Suggested Citation

  • Rosa-Branca Esteves, 2022. "The welfare effects of group and personalized pricing in markets with multi-unit buyers with a decreasing disutility cost in consumption," NIPE Working Papers 6/2022, NIPE - Universidade do Minho.
    • Handle: RePEc:nip:nipewp:6/2022
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    File URL: http://repositorium.sdum.uminho.pt/handle/1822/79680
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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).

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