Recent developments in information technology (IT) have resulted in the collection of a vast amount of customer-specific data. As IT advances, the quality of such information improves. We analyze a unifying spatial price discrimination model that encompasses the two most studied paradigms of two-group and perfect discrimination as special cases. Firms use the available information to classify t...

This article provides a review of the economics literature on oligopoly price discrimination by purchase history. Two basic models of repeated purchases with two firms and two periods are discussed in detail, one in which firms produce a homogenous good ex ante but where there is ex post product differentiation due to consumer switching costs, and another in which firms’ products are differenti...

This paper proposes a dynamic model of duopolistic competition under behaviorbased price discrimination with the following property: in equilibrium, a firm may reward its previous customers although long term contracts are not enforceable. A firm can offer a lower price to its previous customers than to its new customers as a strategic means to hamper its rival to gather precise information on ...

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets integrated at the distributor level by parallel imports (PI). In this context we show that if competition policy requires uniform wholesale prices across locations it would push retail prices toward convergence as transportation costs fall. However, these retail prices could be higher t...

When a firm is able to recognize its previous customers, it may use information about their purchase histories to price discriminate. We analyze a model with a monopolist and a continuum of heterogeneous consumers, where consumers are able to maintain their anonymity and avoid being identified as past customers, possibly at an (exogenous) cost. When consumers can costlessly maintain their anony...

Price discrimination has been ubiquitous in the business world for decades. More recently, advances in information technologies have enabled sellers to collect and store customer information much more cost-e¤ectively. Equipped with analytical tools from burgeoning research in data mining, sellers learn more about each customer’s purchasing pattern, and have begun to personalize prices and produ...

A common form of Corporate Social Responsibility (CSR) by firms is to agree to donate a fixed portion of private good revenues to a charitable cause. In this paper we explore a new rationale for such CSR. We argue that linking private good purchase with charitable donations allows the firm to price discriminate between altruistic consumers who wish to make charitable donations out of their inco...

Price discrimination is generally thought to improve firm profits by allowing firms to extract more consumer surplus. In competition, however, price discrimination may also be costly to the firm because restrictive incentive compatibility conditions may allow the competing firm to gain market share at the discriminating firm’s expense. Therefore, with asymmetric competition, it may be the case ...

This paper analyzes regulatory intervention when firms exploit consumers who are myopic in their decision making. As shown by Gabaix and Laibson (2006), a potential equilibrium price strategy of firms involves excessively high-priced add-ons and shrouding of add-on prices, which leads to a social welfare loss and consumer protection problems. Our model introduces a price discrimination equilibr...

In this paper we examine the impact of a web aggregator on firms and consumers in a horizontally differentiated market. When a firm pays a fee to be listed on the aggregator’s website, its location and price become observable to e-users (consumers who visit the website). We consider two settings, depending on the possibility for online firms to offer discounts to e-users. In equilibrium, not al...