Dynamic price discrimination with customer recognition

Sun,C-J 2014, Dynamic price discrimination with customer recognition, B.E. Journal of Theoretical Economics, vol. 14, no. 1, pp. 217-250, doi: 10.1515/bejte-2013-0048.

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Title Dynamic price discrimination with customer recognition
Author(s) Sun,C-JORCID iD for Sun,C-J orcid.org/0000-0002-7363-3533
Journal name B.E. Journal of Theoretical Economics
Volume number 14
Issue number 1
Start page 217
End page 250
Total pages 34
Publisher Walter de Gruyter GmbH
Place of publication Berlin, Germany
Publication date 2014-01-01
ISSN 1935-1704
Keyword(s) behavior-based pricing
bunching
log submodularity
log supermodularity
price discrimination
Summary This paper studies a general two-period model of product line pricing with customer recognition. Specifically, we consider a monopolist who can sell vertically differentiated products over two periods to heterogeneous consumers. Each consumer demands one unit of the product in each period. In the second period, the monopolist can condition the price-quality offers on the observed purchasing behavior in the first period. In this setup, the monopolist can price discriminate consumers in two dimensions: by quality as well as by purchase history. We fully characterize the monopolist's optimal pricing strategy when there are two types of consumers. When the type space is a continuum, we show that there is no fully separating equilibrium, and some properties of the optimal contracts (price-quality pairs) are characterized within the class of partitional perfect Bayesian equilibria.
Language eng
DOI 10.1515/bejte-2013-0048
Field of Research 140199 Economic Theory not elsewhere classified
Socio Economic Objective 910203 Industrial Organisations
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Persistent URL http://hdl.handle.net/10536/DRO/DU:30067278

Document type: Journal Article
Collections: Faculty of Business and Law
School of Accounting, Economics and Finance
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