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Research Note—The Benefits of Personalized Pricing in a Channel

Author

Listed:
  • Yunchuan Liu

    (A. Gary Anderson Graduate School of Management, 900 University Avenue, University of California, Riverside, California 92521)

  • Z. John Zhang

    (The Wharton School, University of Pennsylvania, 700 Jon M. Huntsman Hall, 3730 Walnut Street, Philadelphia, Pennsylvania 19104-6340)

Abstract

In this note, we explore channel interactions in an information-intensive environment where the retailer can implement personalized pricing and the manufacturer can leverage both personalized pricing and entry into a direct distribution channel. We study whether a retailer can benefit from personalized pricing and how upstream personalized pricing or entry into a direct distribution channel affects the allocation of channel profit. We find that the retailer is worse off because of its own or upstream personalized pricing, even when the retailer is a monopoly. However, it may still be optimal for the retailer to embrace personalized pricing in order to reap the strategic benefit of deterring the manufacturer from selling direct and targeting end consumers.

Suggested Citation

  • Yunchuan Liu & Z. John Zhang, 2006. "Research Note—The Benefits of Personalized Pricing in a Channel," Marketing Science, INFORMS, vol. 25(1), pages 97-105, 01-02.
    • Handle: RePEc:inm:ormksc:v:25:y:2006:i:1:p:97-105
    DOI: 10.1287/mksc.1050.0120
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    References listed on IDEAS

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