Please use this identifier to cite or link to this item: http://hdl.handle.net/1822/28963

TitleBehavior-based price discrimination with retention offers
Author(s)Esteves, Rosa Branca
Issue date2014
PublisherUniversidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
Abstract(s)This paper is a first step in investigating the competitive and welfare effects of behavior-based price discrimination (BBPD) in markets where firms have information to employ retention strategies as an attempt to avoid the switching of their clientele to a competitor. We focus on retention activity in the form of a discount offered to a consumer expressing an intention to switch. When retention strategies are allowed, forward looking fi rms anticipate the effect of fi rst period market share on second period pro fits and price more aggressively in the first-period. Thus,first period equilibrium price under BBPD with retention strategies is below its non discrimination counterpart. This contrasts with fi rst period price above the non-discrimination level if BBPD is used and retention activity is forbidden. Regarding second period prices, the use of retention offers increase the price offered to those consumers who do not signal am intention to switch; the reverse happens to those consumers who decide to switch after being exposed to retention offers. As in other models where consumers have stable exogenous brand preferences, the instrument of BBPD is bad for pro fits and welfare but good for consumers. BBPD with the additional tool of retention activity boosts consumer surplus and overall welfare but decreases industry profit.
TypeWorking paper
URIhttp://hdl.handle.net/1822/28963
Publisher versionhttp://www.nipe.eeg.uminho.pt/Uploads/NIPE_WP_09_2014.pdf
Peer-Reviewedno
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

Files in This Item:
File Description SizeFormat 
NIPE_WP_09_2014.pdfBehavior-Based Price Discrimination with Retention Offers708,81 kBAdobe PDFView/Open

Partilhe no FacebookPartilhe no TwitterPartilhe no DeliciousPartilhe no LinkedInPartilhe no DiggAdicionar ao Google BookmarksPartilhe no MySpacePartilhe no Orkut
Exporte no formato BibTex mendeley Exporte no formato Endnote Adicione ao seu ORCID