Optimized Sticky Targeted Pricing

37 Pages Posted: 14 May 2021 Last revised: 2 Aug 2021

See all articles by Benjamin Shiller

Benjamin Shiller

Brandeis University - Department of Economics

Date Written: July 1, 2021

Abstract

Emerging tracking data allow precise predictions of individuals’ reservation values. However, firms are reluctant to conspicuously implement personalized pricing because of concerns about consumer reprisals. This paper examines a concealed form of personalized pricing. Specifically, firms sometimes tailor the “posted price” for the arriving consumer but privately commit to change price infrequently, making it nearly indistinguishable from traditional dynamic pricing. I find this strategy raises profits for medium and low popularity products. I then document similar pricing patterns at Amazon, suggesting that an equivalent strategy is already deployed. Overlooking such price discrimination may have large implications.

Keywords: Personalized Pricing, Targeted Pricing, Sticky Pricing, Dynamic Pricing, Price Discrimination

JEL Classification: D40, D83,L81

Suggested Citation

Shiller, Benjamin, Optimized Sticky Targeted Pricing (July 1, 2021). Available at SSRN: https://ssrn.com/abstract=3845138 or http://dx.doi.org/10.2139/ssrn.3845138

Benjamin Shiller (Contact Author)

Brandeis University - Department of Economics ( email )

Waltham, MA 02454-9110
United States
781-736-5205 (Phone)

HOME PAGE: http://benjaminshiller.com

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