Consumer flexibility, data quality and targeted pricing
We investigate how firms' incentives to acquire customer data for targeted offers depend on its quality. A two-dimensional Hotelling model is proposed where consumers are heterogeneous both with respect to their locations and transportation cost parameters (flexibility). Firms have perfect data on the locations of consumers while data on their flexibility is imperfect. When consumers are relatively homogeneous in their flexibility, in equilibrium both firms acquire customer data regardless of its quality. This increases profits but harms consumers. When consumers are relatively differentiated in flexibility, data acquisition incentives depend on its quality. Only if the data is sufficiently precise, both firms acquire it and their profits decrease, while consumers are better-off. Our model has particular relevance for location-based marketing such as in mobile telephony, where firms have near-perfect information on the proximity of customers but may have imperfect knowledge of other consumer characteristics.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: +49 211 81-13820|
Phone: +49 211 81-15494
Fax: +49 211 81-15499
Web page: http://www.dice.hhu.de/en.html
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.:
- Thisse, J.-F. & Vives, X., 1987.
"On the strategic choice of spatial price policy,"
CORE Discussion Papers
1987008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Liu, Qihong & Shuai, Jie, 2013. "Multi-dimensional price discrimination," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 417-428.
- Greg Shaffer & Z. John Zhang, 2000. "Pay to Switch or Pay to Stay: Preference-Based Price Discrimination in Markets with Switching Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 397-424, 06.
- Shaffer, G. & Zhang, Z.J., 1994. "Competitive Coupon Targeting," Papers 94-02, Michigan - Center for Research on Economic & Social Theory.
- Qihong Liu & Konstantinos Serfes, 2002.
"Quality of Information and Oligopolistic Price Discrimination,"
- Qihong Liu & Konstantinos Serfes, 2004. "Quality of Information and Oligopolistic Price Discrimination," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 671-702, December.
- Qihong Liu & Konstantinos Serfes, 2002. "Quality of Information and Oligopolistic Price Discrimination," Industrial Organization 0203004, EconWPA, revised 06 Mar 2002.
- Nicola Jentzsch & Geza Sapi & Irina Suleymanova, 2010.
"Joint Customer Data Acquisition and Sharing among Rivals,"
Discussion Papers of DIW Berlin
1045, DIW Berlin, German Institute for Economic Research.
- Jentzsch, Nicola & Sapi, Geza & Suleymanova, Irina, 2013. "Targeted pricing and customer data sharing among rivals," International Journal of Industrial Organization, Elsevier, vol. 31(2), pages 131-144.
- Jentzsch, Nicola & Sapi, Geza & Suleymanova, Irina, 2012. "Targeted pricing and customer data sharing among rivals," DICE Discussion Papers 60, Düsseldorf Institute for Competition Economics (DICE), University of Düsseldorf.
- Bester, H. & Petrakis, E., 1994.
"Coupons and Oligopolistic Price Discrimination,"
1994-12, Tilburg University, Center for Economic Research.
- Liu, Qihong & Serfes, Konstantinos, 2005. "Imperfect price discrimination in a vertical differentiation model," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 341-354, June.
- Greg Shaffer & Z. John Zhang, 2002. "Competitive One-to-One Promotions," Management Science, INFORMS, vol. 48(9), pages 1143-1160, September.
- David Besanko & Jean-Pierre Dubé & Sachin Gupta, 2003. "Competitive Price Discrimination Strategies in a Vertical Channel Using Aggregate Retail Data," Management Science, INFORMS, vol. 49(9), pages 1121-1138, September.
- Severin Borenstein, 1985. "Price Discrimination in Free-Entry Markets," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 380-397, Autumn.
- Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Individual Marketing with Imperfect Targetability," Marketing Science, INFORMS, vol. 20(1), pages 23-41, November.
- Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
- Greg Shaffer & Z. John Zhang, 1995. "Competitive Coupon Targeting," Marketing Science, INFORMS, vol. 14(4), pages 395-416.
When requesting a correction, please mention this item's handle: RePEc:zbw:dicedp:117. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.