When Is Product Personalization Profit-Enhancing? A Behavior-Based Discrimination Model

• 成果类型: Article
• 署名作者: Laussel, Didier; Resende, Joana
• 署名单位: Aix-Marseille Universite; Centre National de la Recherche Scientifique (CNRS); Universidade do Porto
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4298
• 发表日期: 2022
• 页码: 8872-8888
• 关键词: behavior-based discrimination; price and product targeting; consumer poaching; consumer retention; segmentation; tacit collusion

摘要

This paper investigates duopoly competition when horizontally differentiated firms are able to make personalized product-price offers to returning customers, within a behavior-based discrimination model. In the second period, firms can profile old customers according to their preferences, selling them targeted products at personalized prices. Product-price personalization (PP) allows firms to retain all old customers, eliminating second-period customer poaching. The overall profit effects of PP are shown to be ambiguous. In the second period, PP improves the matching between customers??? preferences and firms??? offers, but firms do not make any revenues in the rival???s turf. In the Bertrand outcome, second-period profits only increase for both firms if the size of their old turfs are not too different or initial products are not too differentiated. However, the additional secondperiod profits may be offset by lower first-period profits. PP is likely to increase firms??? overall discounted profits when consumers??? (firms???) discount factor is low (high) and firms??? initial products are exogenous and sufficiently different. When the location of initial products is endogenous, profits are hurt because of an additional location (strategic) effect aggravating head-to-head competition in the first period. Likewise, when a fraction of active consumers conceals their identity, PP increases second-period profits at the cost of aggressive first-period price competition. Finally, we show that the room for profitable PP enlarges considerably if firms rely on PP as an effective device to sustain tacit collusive outcomes, with firms credibly threatening to respond to first-period price deviations with