Partitioned Pricing And Consumer Welfare
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Partitioned Pricing And Consumer Welfare
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Author : Kevin Ducbao Tran
language : en
Publisher:
Release Date : 2020
Partitioned Pricing And Consumer Welfare written by Kevin Ducbao Tran and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
In online commerce, obfuscation strategies by sellers are hypothesized to mislead consumers to their detriment and to the profit of sellers. One such obfuscation strategy is partitioned pricing in which the price is split into a base price and add-on fees. While empirical evidence suggests that partitioned pricing affects consumer decisions through salience effects, its consumer welfare consequences are largely unexplored. Therefore, I provide a quantification of the welfare impact of the behavioral response to partitioned pricing. To do so, I derive a discrete choice model that jointly allows for differences in the reaction to marginal changes in add-on fees and the base price as well as a discontinuous effect of a zero fee. The model is based on a framework on limited attention and I estimate it using web scraped data of posted price transactions on eBay Germany. My results suggest under-reaction to marginal changes in the shipping fee, consistent with previous results in the literature. However, I also document a discontinuous positive effect of free shipping on consumer demand, which is novel to the literature. The combined impact of these effects on consumer welfare is less than six percent of consumer surplus. The welfare impact is attenuated because the maximum shipping fee on eBay is capped and the free shipping effect partly counteracts the under-reaction to shipping fees in expectation.
Personalized Pricing And Consumer Welfare
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Author : Jean-Pierre Dubé
language : en
Publisher:
Release Date : 2017
Personalized Pricing And Consumer Welfare written by Jean-Pierre Dubé and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
We study the welfare implications of personalized pricing, an extreme form of third-degree price discrimination implemented with machine learning for a large, digital firm. Using data from a unique randomized controlled pricing field experiment we train a demand model and conduct inference about the effects of personalized pricing on firm and consumer surplus. In a second experiment, we validate our predictions in the field. The initial experiment reveals unexercised market power that allows the firm to raise its price optimally, generating a 55% increase in profits. Personalized pricing improves the firm's expected posterior profits by an additional 19%, relative to the optimized uniform price, and by 86%, relative to the firm's unoptimized status quo price. Turning to welfare effects on the demand side, total consumer surplus declines 23% under personalized pricing relative to uniform pricing, and 47% relative to the firm's unoptimized status quo price. However, over 60% of consumers benefit from lower prices under personalization and total welfare can increase under standard inequity-averse welfare functions. Simulations with our demand estimates reveal a non-monotonic relationship between the granularity of the segmentation data and the total consumer surplus under personalization. These findings indicate a need for caution in the current public policy debate regarding data privacy and personalized pricing insofar as some data restrictions may not per se improve consumer welfare.
The Welfare Effects Of Group And Personalized Pricing In Markets With Multi Unit Buyers With A Decreasing Disutility Cost In Consumption
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Author : Rosa Branca Esteves
language : en
Publisher:
Release Date : 2022
The Welfare Effects Of Group And Personalized Pricing In Markets With Multi Unit Buyers With A Decreasing Disutility Cost In Consumption written by Rosa Branca Esteves and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.
This paper assesses the welfare e⁄ects of rms ability to use data for group and personalized pricing in markets with unit ( q = 1) and multi-unit demand consumers ( q > 1). The disutility cost of not consuming the ideal good is a function of units purchased and can increase at a decreasing rate 2 [0 ; 1] as consumption increases (is the elasticity of the disutility cost with respect to q ): Group pricing (GP) and personalized pricing (PP) are compared to uniform pricing (UP). GP always boosts pro ts at the expense of consumers. When = 0 ; PP reduces industry pro ts and boosts consumer welfare. The same happens when q is low and/or is su¢ ciently high. In contrast, if heterogeneity in demand is su¢ ciently high and is su¢ ciently low, PP can enhance pro ts at the expense of consumer welfare.
Retailer Dynamic Pricing And Pass Through Behavior
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Author : Yun Jeong Choi
language : en
Publisher:
Release Date : 2003
Retailer Dynamic Pricing And Pass Through Behavior written by Yun Jeong Choi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.
Divide And Prosper
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Author : Vicki Morwitz
language : en
Publisher:
Release Date : 1998
Divide And Prosper written by Vicki Morwitz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with Consumer behavior categories.
Divide And Prosper Effects Of Partitioned Prices On Consumers Price Recall And Demand
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Author : Vicki G. Morwitz
language : en
Publisher:
Release Date : 1998
Divide And Prosper Effects Of Partitioned Prices On Consumers Price Recall And Demand written by Vicki G. Morwitz and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998 with categories.
Priced To Influence Sell Satisfy Lessons From Behavioral Economics For Pricing Success
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Author : Utpal Dholakia
language : en
Publisher: Utpal Dholakia
Release Date : 2019-06-23
Priced To Influence Sell Satisfy Lessons From Behavioral Economics For Pricing Success written by Utpal Dholakia and has been published by Utpal Dholakia this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-06-23 with Business & Economics categories.
Pricing holds the key to business success. The greatest challenge in pricing is the human factor. To price effectively, customer psychology usually trumps rational microeconomic thinking. * How did Subway turn one accidentally discovered price promotion into a multi-billion dollar success story? * How much knowledge of prices do customers really have? * Why do most people spend two months’ salary to buy an engagement ring? * Does Pay What You Want pricing really work? * How can you get your customers to trade up? * Why do Supreme t-shirts sell for $1,500 or more? * Why do so many consumers hate Uber’s surge pricing even though economists love it? In Priced to Influence, Sell & Satisfy, you will find answers to these and many more questions. The book introduces the latest thinking about Psychological Pricing, the science of designing effective pricing strategies using behavioral economics principles. You will learn how customers search for, evaluate, share, and use prices in their buying decisions, how they participate in setting prices, and what managers can do to understand and influence these processes. Psychological pricing actions are levered. Many of them require relatively small investments and produce disproportionately large returns to the business.
Voluntary Disclosure And Personalized Pricing
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Author : S. Nageeb Ali
language : en
Publisher:
Release Date : 2019
Voluntary Disclosure And Personalized Pricing written by S. Nageeb Ali and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
A concern central to the economics of privacy is that firms may use consumer data to price discriminate. A common response is that consumers should have control over their data and the ability to choose how firms access it. Since firms draw inferences based on both the data seen as well as the consumer's disclosure choices, the strategic implications of this proposal are unclear. We investigate whether such measures improve consumer welfare in monopolistic and competitive environments. We find that consumer control can guarantee gains for every consumer type relative to both perfect price discrimination and no personalized pricing. This result is driven by two ideas. First, consumers can use disclosure to amplify competition between firms. Second, consumers can share information that induces a seller--even a monopolist--to make price concessions. Furthermore, whether consumer control improves consumer surplus depends on both the technology of disclosure and the competitiveness of the marketplace. In a competitive market, simple disclosure technologies such as "track / do-not-track" suffice for guaranteeing gains in consumer welfare. However, in a monopolistic market, welfare gains require richer forms of disclosure technology whereby consumers can decide how much information they would like to convey.
Behavior Based Price Discrimination With A General Demand
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Author : Rosa Branca Esteves
language : en
Publisher:
Release Date : 2023
Behavior Based Price Discrimination With A General Demand written by Rosa Branca Esteves and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
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 firmsí 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 e§ect 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 play 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.
History Based Versus Uniform Pricing In Growing And Declining Markets
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Author : Oz Shy
language : en
Publisher:
Release Date : 2018
History Based Versus Uniform Pricing In Growing And Declining Markets written by Oz Shy and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
We analyze the Markov Perfect Equilibria of an infinite-horizon overlapping generations model with consumer lock-in to compare the performance of history-based and uniform pricing in growing and declining markets. Under history-based pricing, firms charge higher prices to locked-in customers and lower prices to new customers. We show that a high exit rate of consumers (sufficiently declining market) constitutes a sufficient condition for history-based pricing to generate higher average prices than uniform pricing, thereby harming consumer welfare. In contrast, a high consumer entry rate (sufficiently growing market) ensures that history-based pricing intensifies competition compared with uniform pricing.We analyze the Markov Perfect Equilibria of an infinite-horizon overlapping generations model with consumer lock-in to compare the performance of history-based and uniform pricing in growing and declining markets. Under history-based pricing, firms charge higher prices to locked-in customers and lower prices to new customers. We show that a high exit rate of consumers (sufficiently declining market) constitutes a sufficient condition for history-based pricing to generate higher average prices than uniform pricing, thereby harming consumer welfare. In contrast, a high consumer entry rate (sufficiently growing market) ensures that history-based pricing intensifies competition compared with uniform pricing.