Should Firms Employ Personalized Pricing?

17 Pages Posted: 27 Oct 2015

See all articles by Toshihiro Matsumura

Toshihiro Matsumura

University of Tokyo - Institute of Social Science

Noriaki Matsushima

Osaka University - Institute of Social and Economic Research (ISER)

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Date Written: Winter 2015

Abstract

This paper theoretically considers a duopoly model in which all firms do not always employ personalized pricing. Our model incorporates the fact that firms engage in marginal cost‐reducing activities after they decide whether to employ personalized pricing. When the ex ante cost difference between the firms is large, the less‐efficient firm does not employ personalized pricing even when the fixed cost to do so is zero. This is because employing personalized pricing induces the rival firm to engage more in reducing its costs, which is more likely to harm the less‐efficient firm.

Suggested Citation

Matsumura, Toshihiro and Matsushima, Noriaki, Should Firms Employ Personalized Pricing? (Winter 2015). Journal of Economics & Management Strategy, Vol. 24, Issue 4, pp. 887-903, 2015. Available at SSRN: https://ssrn.com/abstract=2680399 or http://dx.doi.org/10.1111/jems.12109

Toshihiro Matsumura (Contact Author)

University of Tokyo - Institute of Social Science ( email )

Hongo 7-3-1
Tokyo, TOKYO 113-0033
Japan

Noriaki Matsushima

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

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