Personalized pricing with heterogeneous mismatch costs

Arbeitspapier

Personalized pricing has become a reality through digitization. We examine firms' incentives to adopt one of the three pricing schemes: uniform, personalized, or group pricing in a Hotelling duopoly model. There are two types of consumer groups that are heterogeneous in their mismatch costs. We show that both firms employ personalized pricing in equilibrium regardless of the heterogeneity of consumer groups. If the consumer groups' heterogeneity is significant, the profits are higher when both firms use personalized pricing than when they employ uniform pricing; otherwise, the latter profits are higher than the former. Profits are highest when firms employ group pricing among the three cases. The ranking of consumer welfare among the three cases is opposite to that of profits.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 1184

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
• Subject: Personalized pricing ; Group pricing ; Heterogeneous consumer types ; Hotelling model

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Matsushima, Noriaki ; Mizuno, Tomomichi ; Pan, Cong
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/267796
• Last update: 10.03.2025, 11:41 AM CET