Effects of Cost-Information Transparency on Intertemporal Price Discrimination

• 成果类型: Article
• 署名作者: Jiang, Baojun; Sudhir, K.; Zou, Tianxin
• 署名单位: Washington University (WUSTL); Yale University; State University System of Florida; University of Florida
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.13270
• 发表日期: 2021
• 页码: 390-401
• 关键词: intertemporal price discrimination; strategic consumer; cost transparency; Product innovation

摘要

A firm's product-cost information is increasingly transparent to consumers as the firm itself or third parties publish such information, which reduces consumers' uncertainty for the product's cost. Using a dynamic model of firm pricing with forward-looking consumer choices, this study assesses how cost transparency affects the firm's intertemporal price discrimination and profit, as well as the consumers' strategic waiting decisions and surplus.Ceteris paribus, if consumers believe a durable product has a lower cost, they will expect a larger future price drop and tend to delay purchases, impeding the firm's ability to engage in intertemporal price discrimination. Without cost transparency, consumers may infer products with higher prices to have higher costs, giving a low-cost firm incentives to mimic a high-cost firm's high price to encourage consumers to buy early. In contrast, a high-cost firm may choose to distort its price to avoid a low-cost firm's price mimicry. Cost transparency reveals the product's true cost to consumers, limiting the low-cost firm's ability to mimic prices. Thus, cost transparency will benefit (harm) a firm with a high (low) cost. In equilibrium, cost transparency will increase the firm's sales volume and induce more consumers to buy the product earlier instead of later, attenuating strategic waiting by consumers. We also find that cost transparency can lead to higher prices and hurt consumers if the firm has a high cost. In expectation, cost transparency leads to higher firm profits and consumer surplus, facilitating a firm's new product innovation.