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Title:Customer recognition and competition PDF Logo
Authors:Shy, Oz
Stenbacka, Rune
Issue Date:2011
Series/Report no.:Working paper series // Federal Reserve Bank of Boston 11-7
Abstract:We introduce three types of consumer recognition: identity recognition, asymmetric preference recognition, and symmetric preference recognition. We characterize price equilibria and compare profits, consumer surplus, and total welfare. Asymmetric preference recognition enhances profits compared with identity recognition, but firms have no incentive to exchange information regarding customer-specific preferences (symmetric preference recognition). Consumers would benefit from a policy panning information exchange regarding individual consumer preferences. Our welfare analysis shows that the gains to firms from uniform pricing (no recognition) are larger than the associated harm to consumers, regardless of which regime of customer recognition serves as the basis for comparison.
Subjects:customer recognition
price discrimination
behavior-based pricing
JEL:D4
D82
L1
L4
Document Type:Working Paper
Appears in Collections:Working Paper Series, Federal Reserve Bank of Boston

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