Personalized Pricing and Firm Incentives

62 Pages Posted: 15 Sep 2022 Last revised: 18 May 2024

See all articles by Yan Xiong

Yan Xiong

The University of Hong Kong - School of Business

Liyan Yang

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 18, 2024

Abstract

Big data and data technology have led to the widespread adoption of personalized pricing practices. Although price personalization helps a firm extract rent from consumers, it makes prices less transparent, which can harm firm profits in contexts featuring consumer coordination. We show that alternative incentives for the firm, such as corporate social responsibility toward consumers, can facilitate a commitment to lower product prices, which helps overcome the coordination problem among consumers and increases firm profits, thus supporting the notion of “doing well by doing good.” Our analysis provides implications for regulating personalized pricing.

Keywords: Personalized pricing, network effects, price transparency, corporate social responsibility, coordination, firm incentives

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JEL Classification: D11, G32, L20, M14

Suggested Citation

Xiong, Yan and Yang, Liyan, Personalized Pricing and Firm Incentives (May 18, 2024). Available at SSRN: https://ssrn.com/abstract=4203294 or http://dx.doi.org/10.2139/ssrn.4203294

Yan Xiong (Contact Author)

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China

Liyan Yang

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

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