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Personalized pricing versus history-based pricing: implications for privacy policy

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  • Miettinen, Topi
  • Stenbacka, Rune

Abstract

We compare personalized and history-based pricing and show that personalized pricing harms consumer surplus and total welfare when evaluated over a two-period horizon. The model is characterized by two key features: (1) the discounted two-period profits are invariant to whether personalized or history-based pricing is applied because higher period-2 profits with personalized pricing are offset by lower period-1 profits. (2) Consumer mobility is invariant to whether history-based or personalized pricing is applied, but personalized pricing leads to a higher proportion of inefficient switching, and a lower proportion of efficient switching.

Suggested Citation

  • Miettinen, Topi & Stenbacka, Rune, 2015. "Personalized pricing versus history-based pricing: implications for privacy policy," Information Economics and Policy, Elsevier, vol. 33(C), pages 56-68.
    • Handle: RePEc:eee:iepoli:v:33:y:2015:i:c:p:56-68
    DOI: 10.1016/j.infoecopol.2015.10.003
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    Cited by:

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    2. Frederik Zuiderveen Borgesius & Joost Poort, 2017. "Online Price Discrimination and EU Data Privacy Law," Journal of Consumer Policy, Springer, vol. 40(3), pages 347-366, September.
    3. Pizzi, Gabriele & Vannucci, Virginia & Shukla, Yupal & Aiello, Gaetano, 2022. "Privacy concerns and justice perceptions with the disclosure of biometric versus behavioral data for personalized pricing tell me who you are, I’ll tell you how much you pay. Consumers’ fairness and p," Journal of Business Research, Elsevier, vol. 148(C), pages 420-432.

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    More about this item

    Keywords

    Personalized pricing; History-based pricing; Customer recognition; Price discrimination; Privacy; Switching cost;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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