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Personalized pricing with persuasive advertising and the value of consumer information: a duopoly framework

Author

Listed:
  • Lei Yan

    (Southeast University
    Pingdingshan University)

  • Yuxiang Zhang

    (Southeast University)

  • Shue Mei

    (Southeast University)

  • Weijun Zhong

    (Southeast University)

Abstract

This paper studies the effects of persuasive advertising and personalized pricing on duopolistic firms’ profits, consumer surplus and social welfare when one or two firms adopt consumer information to personalized pricing. With a game-theoretic model, the main results are summarized as follows: (1) The profits of both firms when they use consumer information are lower than those when neither of them use consumer information. (2) Consumer surplus increases with the number of firms who collect and use consumer information. Compared with the case that one or no firms have consumer information, the social welfare in the case that both firms have consumer information is the highest. (3) Given both firms adopt persuasive advertising simultaneously, the two firms will trap into “prisoner’s dilemma” when they decide whether to use consumer information or not. (4) In the duopolistic competition, the optimal strategy for data intermediary is to sell information to only one firm.

Suggested Citation

  • Lei Yan & Yuxiang Zhang & Shue Mei & Weijun Zhong, 2024. "Personalized pricing with persuasive advertising and the value of consumer information: a duopoly framework," Electronic Commerce Research, Springer, vol. 24(3), pages 1533-1562, September.
    • Handle: RePEc:spr:elcore:v:24:y:2024:i:3:d:10.1007_s10660-022-09568-2
    DOI: 10.1007/s10660-022-09568-2
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    More about this item

    Keywords

    Persuasive advertising; Consumer information; Personalized pricing; Consumer information value; Duopolistic competition;
    All these keywords.

    JEL classification:

    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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