Conditioning Prices on Purchase History

Marketing Science, 24(3), 367-381, August 2005

39 Pages Posted: 19 Nov 2002 Last revised: 24 Dec 2018

See all articles by Alessandro Acquisti

Alessandro Acquisti

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Hal R. Varian

University of California, Berkeley - School of Information; University of California, Berkeley - Operations and Information Technology Management Group; National Bureau of Economic Research (NBER)

Date Written: 2005

Abstract

Many transactions are now computer mediated, making it possible for sellers to condition their pricing on the history of interactions with individual consumers. This paper investigates conditions under which price conditioning will or will not be used. Our simplest model involves rational consumers with constant valuations for the good being sold and a monopoly seller who can commit to a pricing policy. In this framework, the seller will not find it profitable to condition pricing on past behavior. We consider various generalizations of this model, such as allowing the seller to offer enhanced services to previous customers, making the seller unable to commit to a pricing policy, and allowing competition in the marketplace. All of these generalizations have equilibria with price conditioning.

Keywords: Price discrimination, Price conditioning, Privacy, Ecommerce, Microeconomics

JEL Classification: D11, D21, D91, L15

Suggested Citation

Acquisti, Alessandro and Varian, Hal R., Conditioning Prices on Purchase History (2005). Marketing Science, 24(3), 367-381, August 2005, Available at SSRN: https://ssrn.com/abstract=336684 or http://dx.doi.org/10.2139/ssrn.336684

Alessandro Acquisti (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States
412-268-9853 (Phone)
412-268-5339 (Fax)

Hal R. Varian

University of California, Berkeley - School of Information ( email )

102 South Hall
Berkeley, CA 94720-4600
United States
510-642-9980 (Phone)
510-642-5814 (Fax)

HOME PAGE: http://www.sims.berkeley.edu/~hal/people/hal/biography.html

University of California, Berkeley - Operations and Information Technology Management Group ( email )

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Berkeley, CA 94720
United States
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National Bureau of Economic Research (NBER)

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