Behavior-based price discrimination with a general demand
Autor(a) principal: | |
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Data de Publicação: | 2023 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | https://hdl.handle.net/1822/84057 |
Resumo: | This paper offers a complete picture of the impact of behavior-based price discrimination on profits, consumer surplus, and welfare in markets with a general demand function, where consumers and firms can discount the future at different discount factors. Regardless of the demand function considered, in comparison to uniform pricing, BBPD reduces firms´ second-period prices and profits. In contrast, we show that new results arise regarding the impact of BBPD on first-period prices. Under perfectly inelastic and CES demand, the firm-side effect is null and the consumer-side e¤ect fully explains the increase in first-period prices. This is no longer the case when the price elasticity of demand varies with price level. Specifically, we show that the firm-side effect can lead firms to raise first-period prices, even when consumers are myopic. We also show that, depending on the demand function considered, the consumer side effect can act to reduce or increase first-period prices. The overall impact of BBPD on first-period prices depends on the interplay between these two effects. Our analysis reveals that the output effect and consumer switching plays an important role in explaining the impact of BBPD on welfare. When discount factors are equal, BBPD may have a positive or negative impact on consumer surplus and social welfare, which contrasts with the result that BBPD is beneficial for consumers under a unit and CES demand. For a linear demand function, we identify the regions for firms and consumers discount factors where BBPD can simultaneously enhance or reduce total discounted profits, consumer surplus, and social welfare. |
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Behavior-based price discrimination with a general demandThis paper offers a complete picture of the impact of behavior-based price discrimination on profits, consumer surplus, and welfare in markets with a general demand function, where consumers and firms can discount the future at different discount factors. Regardless of the demand function considered, in comparison to uniform pricing, BBPD reduces firms´ second-period prices and profits. In contrast, we show that new results arise regarding the impact of BBPD on first-period prices. Under perfectly inelastic and CES demand, the firm-side effect is null and the consumer-side e¤ect fully explains the increase in first-period prices. This is no longer the case when the price elasticity of demand varies with price level. Specifically, we show that the firm-side effect can lead firms to raise first-period prices, even when consumers are myopic. We also show that, depending on the demand function considered, the consumer side effect can act to reduce or increase first-period prices. The overall impact of BBPD on first-period prices depends on the interplay between these two effects. Our analysis reveals that the output effect and consumer switching plays an important role in explaining the impact of BBPD on welfare. When discount factors are equal, BBPD may have a positive or negative impact on consumer surplus and social welfare, which contrasts with the result that BBPD is beneficial for consumers under a unit and CES demand. For a linear demand function, we identify the regions for firms and consumers discount factors where BBPD can simultaneously enhance or reduce total discounted profits, consumer surplus, and social welfare.Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)Universidade do MinhoEsteves, Rosa BrancaShuai, Jie20232023-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/1822/84057enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-21T12:00:27ZPortal AgregadorONG |
dc.title.none.fl_str_mv |
Behavior-based price discrimination with a general demand |
title |
Behavior-based price discrimination with a general demand |
spellingShingle |
Behavior-based price discrimination with a general demand Esteves, Rosa Branca |
title_short |
Behavior-based price discrimination with a general demand |
title_full |
Behavior-based price discrimination with a general demand |
title_fullStr |
Behavior-based price discrimination with a general demand |
title_full_unstemmed |
Behavior-based price discrimination with a general demand |
title_sort |
Behavior-based price discrimination with a general demand |
author |
Esteves, Rosa Branca |
author_facet |
Esteves, Rosa Branca Shuai, Jie |
author_role |
author |
author2 |
Shuai, Jie |
author2_role |
author |
dc.contributor.none.fl_str_mv |
Universidade do Minho |
dc.contributor.author.fl_str_mv |
Esteves, Rosa Branca Shuai, Jie |
description |
This paper offers a complete picture of the impact of behavior-based price discrimination on profits, consumer surplus, and welfare in markets with a general demand function, where consumers and firms can discount the future at different discount factors. Regardless of the demand function considered, in comparison to uniform pricing, BBPD reduces firms´ second-period prices and profits. In contrast, we show that new results arise regarding the impact of BBPD on first-period prices. Under perfectly inelastic and CES demand, the firm-side effect is null and the consumer-side e¤ect fully explains the increase in first-period prices. This is no longer the case when the price elasticity of demand varies with price level. Specifically, we show that the firm-side effect can lead firms to raise first-period prices, even when consumers are myopic. We also show that, depending on the demand function considered, the consumer side effect can act to reduce or increase first-period prices. The overall impact of BBPD on first-period prices depends on the interplay between these two effects. Our analysis reveals that the output effect and consumer switching plays an important role in explaining the impact of BBPD on welfare. When discount factors are equal, BBPD may have a positive or negative impact on consumer surplus and social welfare, which contrasts with the result that BBPD is beneficial for consumers under a unit and CES demand. For a linear demand function, we identify the regions for firms and consumers discount factors where BBPD can simultaneously enhance or reduce total discounted profits, consumer surplus, and social welfare. |
publishDate |
2023 |
dc.date.none.fl_str_mv |
2023 2023-01-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
https://hdl.handle.net/1822/84057 |
url |
https://hdl.handle.net/1822/84057 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE) |
publisher.none.fl_str_mv |
Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE) |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
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Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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RCAAP |
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RCAAP |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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