Contidioning Prices on Purchase History
Many transactions are now computer mediated, making it possible for sellers to condition their pricing on the history of interactions with individual consumers. This paper investigates conditions under which price conditioning will or will not be used. Our simplest model involves rational consumers with constant valuations for the good being sold and a monopoly seller who can commit to a pricing policy. In this framework, the seller will not find it profitable to condition pricing on past behavior. We consider various generalizations of this model, such as allowing the seller to offer enhanced services to previous customers, making the seller unable to commit to a pricing policy, and allowing competition in the marketplace. All of these generalizations have equilibria with price conditioning.
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.:
- John G. Riley & Richard Zeckhauser, 1980. "Optimal Selling Strategies:," UCLA Economics Working Papers 180, UCLA Department of Economics.
- Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
- J. Miguel Villas-Boas, 1999. "Dynamic Competition with Customer Recognition," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 604-631, Winter.
- Stokey, Nancy L, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, MIT Press, vol. 93(3), pages 355-71, August.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Drew Fudenberg & Jean Tirole, 1999.
"Customer Poaching and Brand Switching,"
Harvard Institute of Economic Research Working Papers
1871, Harvard - Institute of Economic Research.
- Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
- Salant, Stephen W, 1989. "When Is Inducing Self-selection Suboptimal for a Monopolist?," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 391-97, May.
- Peter E. Rossi & Robert E. McCulloch & Greg M. Allenby, 1996. "The Value of Purchase History Data in Target Marketing," Marketing Science, INFORMS, vol. 15(4), pages 321-340.
- Allenby, Greg M. & Rossi, Peter E., 1998. "Marketing models of consumer heterogeneity," Journal of Econometrics, Elsevier, vol. 89(1-2), pages 57-78, November.
- Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
- Klemperer, Paul, 1989. "Price Wars Caused by Switching Costs," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 405-20, July.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0210001. 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: (EconWPA)
If references are entirely missing, you can add them using this form.