Wednesday, January 27, 2016

Behavior-based price discrimination and customer information sharing

Romain De Nijs (Ecole Polytechnique [Palaiseau] - Ecole Polytechnique, PSE - Paris-Jourdan Sciences Economiques - CNRS - Institut national de la recherche agronomique (INRA) - EHESS - Ecole des hautes etudes en sciences sociales - ENS Paris - Ecole normale superieure - Paris - Ecole des Ponts ParisTech (ENPC)) explores Behavior-based price discrimination and customer information sharing.

ABSTRACT: This article investigates the incentives and the effects of information sharing among rival firms about the identities of their past customers in a two-period model with behavior based price discrimination (BBPD). An unilateral information exchange between the two periods takes place in a subgame-perfect equilibrium. This exchange increases the ability of the industry to price discriminate consumers according to their profiles and boosts the profitability of BBPD at the expense of consumers.

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