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Personalized Pricing and Competition

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Abstract

We study personalized pricing in a general oligopoly model. When the market structure is fixed, the impact of personalized pricing relative to uniform pricing hinges on the degree of market coverage. If market conditions are such that coverage is high, personalized pricing harms firms and benefits consumers, whereas the opposite is true if coverage is low. However, when the market structure is endogenous, personalized pricing benefits consumers because it induces socially optimal firm entry. Finally, when only some firms have data to personalize prices, consumers can be worse off compared to when either all or no firms personalize prices.

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  • Andrew Rhodes & Jidong Zhou, 2022. "Personalized Pricing and Competition," Cowles Foundation Discussion Papers 2329R, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:2329r
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    Citations

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    Cited by:

    1. Adachi, Takanori, 2023. "A sufficient statistics approach for welfare analysis of oligopolistic third‐degree price discrimination," International Journal of Industrial Organization, Elsevier, vol. 86(C).
    2. Groh, Carl-Christian, 2023. "Search, Data, and Market Power," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277701, Verein für Socialpolitik / German Economic Association.
    3. Qiuyu Lu & Noriaki Matsushima, 2023. "Personalized pricing when consumers can purchase multiple items," ISER Discussion Paper 1192, Institute of Social and Economic Research, Osaka University.
    4. Foros, Øystein & Kind, Hans Jarle & Nguyen-Ones, Mai, 2024. "The choice of pricing format: Firms may choose uniform pricing over personalized pricing to induce rivals to soften competition," Information Economics and Policy, Elsevier, vol. 66(C).
    5. Brian C. Albrecht & Mark Whitmeyer, 2023. "Comparison Shopping: Learning Before Buying From Duopolists," Papers 2302.06580, arXiv.org, revised Apr 2023.
    6. Carl-Christian Groh, & Jonas von Wangenheim, 2024. "Pigou Meets Wolinsky: Search, Price Discrimination, and Consumer Sophistication," CRC TR 224 Discussion Paper Series crctr224_2024_527, University of Bonn and University of Mannheim, Germany.
    7. Qiuyu Lu & Noriaki Matsushima & Shiva Shekhar, 2024. "Welfare Implications of Personalized Pricing in Competitive Platform Markets: The Role of Network Effects," CESifo Working Paper Series 10994, CESifo.

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