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This paper considers an entry game in which an incumbent firm operates in a number of markets and a potential entrant seeks to enter some or all of the markets. While price discrimination has usually been thought of as a barrier to entry, in our model it is not and, on the contrary, we find that charging a uniform price across the markets actually discourages entry. Partial entry occurs when the two firms’ products are highly substitutable. In this case, a ban on price discrimination raises the profits of both the incumbent and the entrant but reduces consumer and total welfare.

The spatial distribution of production is a defining characteristic of agriculture, and the location choice in geographic space and the spatial pricing policies adopted by agricultural processing/packing firms are key determinants of the competitiveness and efficiency of agricultural product procurement markets. Spatially distributed buying firms in the presence of costly transportation of farm products creates natural oligopsony procurement markets. Although several studies have contributed to our understanding of price and output determination and the distribution of welfare in these markets, all are limited in that they address buying firms' locations or their choices of spatial pricing strategy in isolation, holding the other factor fixed, even though both would be chosen jointly in reality to comprise a firm's product-procurement strategy. Here we overcome this limitation by using computational methods (including genetic algorithms) to study duopsony firms' joint choices of location and pricing policy. Our results differ considerably from those presented in prior literature. In general, we find that, when buyers have the flexibility to jointly choose their locations and pricing strategies, market outcomes are much more competitive and locations more efficient in terms of cost minimization than has been predicted by prior studies viewing location choice or pricing strategy in isolation.

A data broker sells market segmentations created by consumer data to a producer with private production cost who sells a product to a unit mass of consumers with heterogeneous values. In this setting, I completely characterize the revenue-maximizing mechanisms for the data broker. In particular, every optimal mechanism induces quasi-perfect price discrimination. That is, the data broker sells the producer a market segmentation described by a cost-dependent cutoff, such that all the consumers with values above the cutoff end up buying and paying their values while the rest of consumers do not buy. The characterization of optimal mechanisms leads to additional economically relevant implications. I show that the induced market outcomes remain unchanged even if the data broker becomes more active in the product market by gaining the ability to contract on prices; or by becoming an exclusive retailer, who purchases both the product and the exclusive right to sell the product from the producer, and then sells to the consumers directly. Moreover, vertical integration between the data broker and the producer increases total surplus while leaving the consumer surplus unchanged, since consumer surplus is zero under any optimal mechanism for the data broker.

We compare the profit of the optimal third-degree price discrimination policy against a uniform pricing policy. A uniform pricing policy offers the same price to all segments of the market. Our main result establishes that for a broad class of third-degree price discrimination problems with concave profit functions (in the price space) and common support, a uniform price is guaranteed to achieve one half of the optimal monopoly profits. This profit bound holds for any number of segments and prices that the seller might use under third-degree price discrimination. We establish that these conditions are tight and that weakening either common support or concavity can lead to arbitrarily poor profit comparisons even for regular or monotone hazard rate distributions., Comment: 26 pages, 5 figures

We develop a model of inter-temporal and intra-temporal price discrimination by monopoly airlines to study the ability of different discriminatory pricing mechanisms to increase efficiency and the associated distributional implications. To estimate the model, we use unique data from international airline markets with flight-level variation in prices across time, cabins, and markets and information on passengers’ reasons for travel and time of purchase. The current pricing practice yields approximately 77% of the first-best welfare. The source of this inefficiency arises primarily from private information about passenger valuations, not dynamic uncertainty about demand. We also find that if airlines could discriminate between business and leisure passengers, total welfare would improve at the expense of business passenger surplus. Also, replacing the current pricing that involves screening passengers across cabin classes with offering a single cabin class has minimal effect on total welfare.

We analyze the endogenous choice of competition mode when asymmetric retailers engage in price discrimination and uniform pricing with upstream monopoly via a linear wholesale contract. In contrast to previous results, if the cost difference is sufficiently large between asymmetric retailers, choosing a price contract for the efficient retailer and choosing a quantity contract for the inefficient retailer are implemented under both price discrimination and uniform pricing rules, while Cournot competition is sustained if the cost difference is sufficiently small. Although similar endogenous choice of (a)symmetric competition in equilibrium can be achieved in both pricing rules, social welfare, producer and consumer surpluses are higher under price discrimination than under uniform pricing unless the cost difference is small.

Recent progress in information technologies provides sellers with detailed knowledge about consumers' preferences, approaching perfect price discrimination in the limit. We construct a model where consumers with less strategic sophistication than the seller's pricing algorithm face a trade-off when buying. They choose between a direct, transaction cost-free sales channel and a privacy-protecting, but costly, anonymous channel. We show that the anonymous channel is used even in the absence of an explicit taste for privacy if consumers are not too strategically sophisticated. This provides a micro-foundation for consumers' privacy choices. Some consumers benefit but others suffer from their anonymization.

Food banks play a critical part in the food distribution system. In this paper, we examine the impact of food bank donations on retailer markups using a unique store-level data set on donations, labor employment, sales, and capital employment. We frame our empirical model of food bank donations and store-level markups in terms of a theoretical model of quality-based price discrimination and retail sales. We find that stores that donate more food to the local food bank are able to charge higher markups - 33% higher - after controlling for the well-known endogeneity problems that bedevil production analysis. Our findings suggest that donations are not necessarily only altruistic gestures on the part of retailers, but rather part of a symbiotic relationship between food banks and food retailers.

Empirical evidence of quality-based price discrimination (second degree) is limited. I find consumers have positive and heterogenous valuations for the baby-cut attribute of carrots, and I model an...

Using publicly available information, the article examines the economic concepts, which underlie the arguments of the decision of Polish competition authority UOKiK in relation to the participants of the Nord Stream 2. It explains the interrelation between economic and legal concepts, which are to be applied to interpret the competitive impact of joint venture and probable theory of harm for infrastructure investments under competition law of European Union, including in comparison with Russian competition law. It has been demonstrated that the resolution of a consortium case should be based on the proof of two statements. The first statement implies that the joint venture is a firm (and therefore the creation of a joint venture is a deal leading to economic concentration). The second statement means that despite Gazprom adopted the commitments about decision of the European Commission and trends in the development of the European gas market, the possibility of price discrimination is retained. Discussion and contestation of the decision against PJSC Gazprom testify in favor of maintaining the relevance of institutional studies and studies of industry markets for resolving legal disputes arising from the application of competition law.

Environmental pressures and people’s demands for green consumption have prompted manufacturers to engage in the research and development of green products. Manufacturers need to consider the price and greenness of products when making production decisions. This paper analyzes the level of greenness and price competition of duopoly manufacturers in the consumer market in which both green-sensitive consumers (salience to greenness) and price-sensitive consumers (salience to price) exist simultaneously according to salience theory. We find that the regular manufacturer will enter the green market when all consumers’ average degree of price responsiveness is small or in a moderate part of the region. In addition, this paper also discusses the influence of salience on manufacturers’ level of greenness and pricing strategy choice. We find that the degree of salient thinking of consumers influences optimal pricing, optimal greenness and profits under the uniform pricing and price discrimination mechanisms.

This research examines the effects of input price discrimination on allocation efficiency and social welfare. Instead of assuming constant marginal costs, we allow downstream firms to produce under increasing marginal costs. When downstream firms operate in separate markets, even though total output remains unchanged, consumer surplus and social welfare could be greater under discriminatory pricing than under uniform pricing. Moreover, the social desirability of input price discrimination can still hold true when downstream firms compete either in Cournot or Bertrand fashion.

Digital markets provide firms with vast amounts of consumer data. Economists who have explored this phenomenon have focused on how firms use data to implement price discrimination. Targeted advertising in this context transmits different price information to different consumers. However, advertising is itself often valued by consumers, and can be viewed as a complement to the advertised product. Such advertising may also be customized and targeted. We investigate how targeted value-enhancing advertising affects competition. Competing for consumers with targeted advertising leads overall to higher prices and increases consumer surplus but reduces profitability. In certain markets the advertising is inefficiently over-supplied.

Enforcement is a key revenue management price discrimination tool. This study is first to address a hotel industry concern that enforcement is increasingly failing, as 3rd party agents resell unqualified prices to deal-oriented customers. We outline a decision model that involves the discount level (cost saving for the consumer) and information regarding a possible service denial by the hotel (risk to the consumer). Most importantly, this study is first to suggest, and empirically test, the notion that the level of discount might diminish the ability of information regarding service denial to reduce the undesirable behavior.

Using data on mobile Internet usage of thousands of individuals, we provide some of the first analyses linking mobile usage to key demographics such as income. We find a reverse‐U relationship between mobile Internet usage and income—notably different than the monotonically declining relationship found on home devices. This pattern suggests that data caps are particularly binding on low‐income users. We then construct a simple model of mobile Internet usage that incorporates demand features suggested by our empirical finding and prior empirical findings on device adoption and usage. After abstracting away from cost and two‐sided market considerations, we solve the model, and through comparative statics, identify demand conditions for which usage‐based pricing (via a data cap) is, or is not, revenue enhancing. Key insights from this analysis are: (1) the tendency toward demand‐driven price discrimination is hill‐shaped (increasing then decreasing) in the number of low‐income users and eventually declining in high‐income users, and (2) a relatively high (low) proportion of total value attained from relatively low usage levels by low‐income (high‐income) users increases the tendency toward demand‐driven price discrimination. Hence, to the extent that a market has a large number of low‐income users and/or high‐income users attain a higher proportion of their total value at the cap than low‐income users, the use of caps by providers is more likely driven by cost (or other non‐demand‐side) considerations than by revenue enhancement. Lastly, additional analysis shows a largely monotonically increasing relationship between income and usage intensity (measured as page views in a session), suggesting that, ceteris paribus, price discrimination strategies may be more effective if tied to usage intensity rather than duration.

Revenue, cost, tuition, and scholarship data at private liberal arts colleges from 2003–2013 are used to estimate how each college's net revenue per student varies with student enrollment. Our empirical specification assumes that colleges simultaneously pick their optimal net tuition and cost of instruction. The estimates allow us to identify the enrollment level that maximizes the return on the college's provision of educational services. Thirty‐seven percent of the colleges have enrollments within one standard deviation of their profit maximizing enrollment. Another 11% are more than one standard deviation above the profit maximizing level; they increase access to students but not revenue. Compared to the profit maximizing colleges, the institutions with enrollments beyond their profit maximum have stronger endowments and enroll more low‐income students. Although no schools were below their shut‐down enrollment, 13% were within one standard deviation of their minimum enrollment and may be vulnerable to tuition revenue shock.

We present the first demonstration of the influence of a quality rivalry on location choices under spatial price discrimination. The rivalry is shown to generate the socially efficient quality but to push locations inefficiently close together, a result not found under Hotelling pricing. We apply this new equilibrium to the anti-trust policy issue of collusion showing that introducing the quality rivalry reduces the likelihood of collusion.

We study how input price discrimination and non-controlling, vertical shareholding interact. We first discuss the implications of the invariance principle (Greenlee and Raskovich in Eur Econ Rev 50:1017–1041, 2006) for input price discrimination across independent downstream markets. We show that, in the short term, price discrimination based on non-controlling, backward shareholding is more likely to improve welfare than other forms of input price discrimination, because it results in a positive consumption reallocation effect. However, if the derived demand for the input is convex, and less so as output increases, input price discrimination is irrelevant in the long term, because the ownership structures that prevail under discriminatory and uniform input pricing yield the same market outcome. The main contribution of the paper is to show that input price discrimination matters, in the short and the long term, if downstream firms compete in prices. In particular, we find that input price discrimination improves welfare in the short term, for any given ownership structure, and in the long term, through its impact on shareholding.

The single euro payments area (SEPA) project eliminates the incompatibility between domestic payment systems across European countries. It also enforces uniform pricing between national and international transactions. How does this policy affect competition among European banks in the retail payment market? To address this question, we explore and solve a model of non-linear price competition between two asymmetric banks in terms of transactional capital by considering price discrimination in pre-SEPA and uniform pricing in post-SEPA, under presence of economies of scale. Our results show that the transaction pattern plays an important role in the effect of SEPA on competition between banks; Competition is less intense in post-SEPA when the transaction pattern is domestically oriented. Moreover, comparison of pre-SEPA with post-SEPA phases suggests that SEPA intensifies competition when economies of scale are large enough. We further show that consumer surplus improves in post-SEPA but the effect of SEPA on welfare depends on fixed adjustment cost.

The purpose of this paper is to investigate the impact of wholesale price discrimination by a manufacturer on the profitability of chain members in a Retailer—E-tailer dual-channel supply chain for different product categories based on their online channel preference. We have considered two distinct channel power structures in this study, i.e., (i) retailer has higher channel power than the e-tailer and (ii) e-tailer has higher channel power than the retailer. Game-theoretic models are developed to examine the competition between the retailer and e-tailer and to derive their optimal decisions under equal wholesale price strategy and discriminatory wholesale price strategy for the channel power structures considered. Further, a numerical example was employed to quantify the results and to capture the variation with respect to online channel preference of the product. We have found that discriminatory wholesale price strategy is the gainful strategy (i) for a manufacturer dealing with products having high online channel preference under retailer leader structure (ii) for the manufacturer dealing with products having low online channel preference under e-tailer leader structure. Equal wholesale price strategy is the gainful strategy (i) for a manufacturer dealing with products having low online channel preference under retailer leader structure and (ii) for a manufacturer dealing with products having high online channel preference under e-tailer leader structure. The study helps the manufacturers to maximize their profit by adopting the right wholesale price strategy considering the online channel preference of the product and the downstream channel power structure.

This paper analyzes welfare under differential versus uniform pricing across oligopoly markets that differ in costs of service. We establish necessary and sufficient conditions on demand properties---cross/own elasticities and curvature---for differential pricing by symmetric firms to raise aggregate consumer surplus, profit, and total welfare. The analysis reveals intuitively why differential pricing is generally beneficial though not always---including why profit can fall, unlike for monopoly---and why it is more beneficial than oligopoly third-degree price discrimination. When firms have asymmetric costs, however, differential pricing can reduce profit or consumer surplus even with `simple' demands such as linear.

We provide a novel rationale as to why firms sell gift cards, although consumers prefer cash to gift cards. Issuing gift cards enables firms to charge higher prices for products. Since gift cards have the effect of price discrimination by discounting the product prices only to card-holding consumers, the card-holding consumers become less price sensitive, and thus firms can raise prices due to the elasticity effect. Although gift cards lock consumers into the card-issuing firm, the lock-in effect is not essential for our result. We show that in the absence of lock-in effects (when competing firms honor their rival's gift cards), the equilibrium price, surprisingly, rises even higher due to a double elasticity effect. Our results predict that rapid growth in the gift card market is likely to continue, and that it could attract additional regulatory scrutiny based on their anti-competitive effects.

Passive partial ownership (PPO) is commonly practised in many industries. When operating profits of stock-owned firms decrease, stock-holding firms will increase output to reduce capital gain throu...

A consumer’s decision to engage in search depends on the beliefs the consumer has about an unknown product characteristic (e.g., price). Because beliefs are rarely observed, researchers typically assume that consumers have rational expectations or update beliefs consistent with Bayesian updating. These assumptions are restrictive and do not enable the researcher or the retailer to price discriminate among consumers on the basis of heterogeneity in beliefs. The authors use Monte Carlo experiments to show how these assumptions affect estimates of search cost. Next, they design an incentive-aligned online study in which participants search over the price of a homogeneous good, and the authors elicit distributions of price beliefs before and after each search. Drawing on data collected from a nationally representative panel, they find substantial heterogeneity in prior price beliefs, such that participants update their beliefs in response to search outcomes but deviate from Bayesian updating in that they underreact to new information. Importantly, the authors show that (1) assuming Bayesian updating does not significantly bias search cost estimates at the aggregate level if the researcher accounts for heterogeneous prior beliefs, (2) eliciting heterogeneity in prior expected prices is much more important than eliciting heterogeneity in prior price uncertainty, and (3) a retailer can increase profits through third-degree price discrimination by recognizing the heterogeneity in prior beliefs.

We consider a mixed duopoly selling to downstream retailers that are engaged in spatial price discrimination. We show that the optimal degree of privatization falls below—often far below—the level that is implied in the absence of the vertical chain. The size of this reduction in privatization reflects the extent to which increasing transport cost (differentiation) increases double marginalization in contested market regions—as opposed to simply reducing demand in uncontested market regions. Moreover, we show that despite higher costs of production, a fully public monopoly upstream can be welfare-superior to the optimal mixed duopoly. This would not be the case in the absence of downstream differentiation.

Weyl and Fabinger (2013) analyze the social incidence of competition and the output and welfare effects of third-degree price discrimination by considering the hypothetical entrance of exogenous qu...

This study investigated the impact of diverse technical and economic factors on sustainable dairy small ruminant farmer market choices in Cyprus. It determined the factors that affect farmer choice between selling milk to a large dairy processor or a traditional small dairy. Detailed interviews with farmers based on a structured questionnaire were conducted in the frame of the DoMEsTIc research project. We used a Probit model to relate adoption behavior to farmer, farm, and market characteristics. Both technico-economic and market aspects contributed to farmer decisions on sustainable milk market channels. Important technico-economic factors were flock size, existence of successor, availability of family labour, computer use, and breeding experience. Market factors that affected farmer decision for a suitable milk market channel were the sheep milk price, the type of contract with buyers (formal or informal), the payment method and the price differentiation according to specific milk quality specifications.JEL Codes: Q01, Q12, Q13

In a homogenous product market, customers’ different demand elasticities may lead to different prices. This study examined price discrimination’s effect on equilibrium points in Cournot duopoly games by assuming that each firm charges K prices and adjusts its strategies based on bounded rationality. In consideration of price discrimination, two discrete dynamic game systems with 2K variables were introduced for players with homogenous or heterogenous expectations. The stability of the Nash equilibrium point was found to be independent of price discrimination. Given price discrimination, the stability of boundary stationary points for the system with homogenous players is different from that for the system with heterogenous players. Numerical simulations verified the critical point for the system with homogenous players from being stable to its bifurcation.

Chilean antitrust authorities banned termination-based price discrimination in mobile calls in 2012. This paper discusses the antitrust process that led to this prohibition and analyzes its merits. We characterize the discriminatory plans that the largest mobile company in Chile—Movistar—offered in 2010, when the legal dispute began, calibrate a competition model for the Chilean market—both for pre- and post-paid customers—and compare the observed price differentials with those which are justifiable on competitive grounds. The main result is that in most plans, efficiency and strategic reasons could explain the observed differential only for large call externality parameter values. We also discuss Competition Court rulings in the context of several other changes that affected the mobile telephony market in Chile and report the evolution of several key market indicators after the ban was introduced.

In 2010, the US Supreme Court loosened contribution limits to Political Action Committees (PACs), sparking fears that big donors could exert outsize influence on elections by funding PAC advertising. However, PACs are potentially handicapped when buying advertising time; data from 2012 reveal that PACs pay 32% above regulated campaign rates. I estimate a model of demand for advertising by PACs, exploiting the misalignment of state and media market borders to address price endogeneity. I find that prices reflect willingness‐to‐pay for viewer demographics rather than media bias. The estimates further suggest that network‐owned stations discriminate more successfully than do local affiliates.

We study a two-period model of behavior-based price discrimination, as in Fudenberg and Tirole (RAND J Econ 31(4):634–657, 2000), but we allow firms to make their product choices in the first period. We show that the only possible equilibrium involves maximal differentiation. This is in contrast to Choe et al. (Manag Sci 64(12):5669–5687, 2018), where equilibrium features less-than-maximal differentiation when competition is in personalized pricing. Thus, our result highlights an important interplay between the type of price competition and product choice.

We examine a food retailer’s incentive to use a minimum quality standard as part of a quality-based price-discrimination strategy and show how price discrimination can result in a substantial level of retail food waste. Using data from a major US food retailer, we estimate a structural model of retail price discrimination and conduct a series of counter-factual experiments to demonstrate that observed retail prices are consistent with quality-based price discrimination in the retail market. Our findings indicate that quality standards on fresh produce can explain a substantial proportion ($7.5\%$) of food waste by retailers in the US.

We analyze collusive outcomes under different pricing schemes in a differentiated product market in which customers have elastic demand. Starting with a situation in which firms can set two‐part tariffs to price discriminate, we consider two policy interventions that ban price discrimination: Firms must set (a) linear prices or (b) fixed fees. We find that collusion at maximum prices becomes harder to sustain under linear prices. By contrast, the analysis shows that the fixed fees policy facilitates collusion at maximum prices. The results have important implications for competition policy.

This study examines the impacts of behavior-based price discrimination (BBPD) on profits, consumer surplus, and welfare when firms choose their product qualities. To this end, we consider a differentiated duopoly model in which firms first make quality decisions, and in the two subsequent periods, compete in prices according to the pricing scheme, namely, uniform pricing or BBPD. We show that when consumers are more than moderately forward-looking, firms choose lower quality levels under BBPD than under uniform pricing. The profit and consumer surplus effects of BBPD relative to uniform pricing depend on the level of consumers’ myopia and/or quality improvement costs. When consumers are sufficiently myopic or quality costs are high, BBPD reduces industry profits and raises consumer surplus. However, the reverse happens when consumers are sufficiently forward-looking and quality costs are low. Interestingly, BBPD is detrimental to both firms and consumers when consumers are sufficiently forward-looking and quality costs are moderate, or when consumers are moderately forward-looking and quality costs are low. Social welfare is always lower under BBPD than under uniform pricing.

In recent years, important concerns have been raised about the increasing capabilities of pricing algorithms to make use of artificial intelligence (AI) technologies. Two issues have gained particular attention: algorithmic price discrimination (PD) and algorithmic tacit collusion (TC). Although the risks and opportunities of both practices have been explored extensively in the literature, neither has yet been observed in the actual practice. As a result, there remains much confusion as to the ability of algorithms to engage in potentially harmful behavior with respect to price discrimination and collusion. In this article, we embed the economic and legal literature on these topics in a technological grounding to provide a more objective account of the capabilities of current AI technologies to engage in price discrimination and collusion. We argue that attention to these current technological capabilities should more directly inform on-going discussions on the urgency to reform legal rules or enforcement practices governing algorithmic PD and TC.

Omni-channel supply chains provide customers with increased convenience to experience products and gather price information. Having more information under omni-channel retailing means customers can...

The rise of big data and sophisticated, machine learning algorithms is increasing the prevalence of price discrimination and even personalized pricing. In traditional models, where consumers’ willi...

Price discrimination is widely considered unethical/unfair by consumers, as has been borne out by decades of psychological research and mainstream press reporting. However, little academic work has been done to investigate the ethics of price discrimination. The work that has been done to date concludes that while price discrimination is not unethical, despite widespread lay perceptions, it is at best morally neutral. We argue price discrimination ismoreethical than unitary pricing, when done ‘progressively,’ meaning firms charge customers as a function of their willingness-to-pay. We introduce this specific kind of price discrimination as ‘Progressive Pricing’ and demonstrate it ethically outperforms a ‘Unitary Pricing’ scheme (where everyone pays the same price, regardless of their willingness-to-pay), at least within a broadly consequentialist framework. We do this by comparing a Unitary Pricing scheme to a Progressive one, analyzing them through the lenses of four different consequentialist ‘Social Welfare Functions’ (Utilitarian, Egalitarian, Prioritarian, and Leximin), which are used by welfare economists and philosophers to rank the distributions of different social outcomes, concluding that Progressive Pricing is preferred regardless of which Social Welfare Function(s) one finds most plausible.

Quantity vouchers are used in redistributive programs to shield participants from price variation and alter their consumption patterns. However, because participants are insensitive to prices, vendors of program goods are incentivized to price discriminate between program and non-program customers. I study these trade-offs in the context of a reform to reduce price discrimination in the Supplemental Nutrition Program for Women, Infants, and Children (WIC), which provides a quantity voucher for nutritious foods to low-income mothers and children. The reform caused vendors to drop out, reducing program take-up. In addition, smaller vendors increased prices charged to non-WIC shoppers by 6.4 percent. (JEL H75, I18, I32, I38, J13, J16)

In 2016, the UK Competition and Markets Authority (CMA) found that “weak customer response” enabled incumbent UK energy retailers to set higher and discriminatory prices to residential customers. The CMA estimated the associated higher prices constituted a customer detriment in the range £1.4 bn to £2 bn per year. Although the CMA recommended against a price cap on most domestic energy tariffs, the size of the detriment and public concern about “rip-off energy tariffs” nonetheless led the Government to impose a price cap as from January 2019. This paper examines the CMA’s calculation of customer detriment and suggests that it is inconsistent with CMA Guidelines and unprecedented with respect to its nature, magnitude and policy impact. Alternative more realistic calculations suggest that any detriment would have been nearly an order of magnitude lower, so that a price cap was inappropriate. This raises a number of questions about the CMA’s approach.

This paper compares the stability of collusion under delivered spatial price discrimination and under uniform pricing. Uniquely using a model of elastic demand, we show that collusion under price discrimination can be more stable thus facilitating collusion and making it more likely. This result holds only when the entire market is competitive. Whenever there exist natural monopoly portions of the spatial market, collusion on the remaining market is less stable with spatial price discrimination making such collusion less likely relative to uniform pricing.

We analyze competing firms’ incentives to adopt a technology that allows making refined targeted offers to returning customers. Consumer foresight is crucial for firms’ decisions. Although our setup is symmetric, when consumers are myopic, the unique equilibrium is asymmetric in firms’ technology adoption decisions. Contrary to conventional wisdom, consumers may be better off being myopic than sophisticated. Light privacy policy may benefit consumers if it reduces the costs of handling customer data and avoids strict obligations on firms to inform consumers about data use, which would erode investment incentives into targeting technology.

To date, pricing and revenue management literature has mostly concerned itself with how firms can maximize revenue growth and minimize opportunity cost. Rarely has the ethical and legal nature of the field been subjected to substantial comment and discussion. This viewpoint article draws attention to some inherent ethical concerns and legal challenges that may come with future developments in pricing, in particular online personalized pricing, thereby seeking to initiate a broader discussion about issues such as dishonesty, unfairness, injustice, and misconduct in pricing and revenue management practices. Reflecting on how legislators and regulators in Europe seek to limit recent developments in personalized pricing, we argue that not much is to be expected from the legal system, at least not in the short run, with regard to guiding the pricing and revenue field in setting and implementing minimum standards of behavior. Scholarly attention should however not only be directed to the legal challenges of new forms of direct price discrimination, such as algorithmic personalized dynamic pricing, but also to the ethical and legal implications of more granular forms of indirect price discrimination, through which consumers will be allowed to ‘freely’ sort themselves into different microsegments, especially when the ‘self-selection’ is enticed by deceptive personalized applications of psychological pricing and neuromarketing.

Product certification such as organic and fairtrade, leads to a price premium for producers in the majority of cases and thus, also encourages them to increase supplied quantities in order to boost...

We calibrate a simple empirical logit model of world demand—and subscription pricing—at Spotify, with the use of available data on monthly prices and using streaming volumes by country to create measures of the numbers of users. We find that country-specific pricing increases revenue by 5.9% relative to uniform world pricing, while country specific pricing decreases world consumer surplus by 1.0%. Country-specific pricing within Europe increases revenue in Europe by 1.1%, and EU consumer surplus increases by 0.3% with country-specific pricing. Consumers in lower-income countries gain more from price discrimination than do the consumers in higher-income countries.

I study the welfare and price implications of consumer privacy. A consumer discloses information to a multiproduct seller, which learns about his preferences, sets prices, and makes product recommendations. Although the consumer benefits from accurate recommendations, the seller may use the information to price discriminate. I show that the seller prefers to commit to not use information for pricing in order to encourage information disclosure. However, this commitment hurts the consumer, who could be better off by precommitting to withhold some information. In contrast to single-product models, total surplus may be lower if the seller can base prices on information. (JEL D11, D83, L81, M31)