Publication Date: May 2022
We study personalized pricing (or ﬁrst-degree price discrimination) in a general oligopoly model. In the short-run, when the market structure is ﬁxed, the impact of personalized pricing hinges on the degree of market coverage (i.e., how many consumers buy). If coverage is high (e.g., because the production cost is low, or the number of ﬁrms is large), personalized pricing intensiﬁes competition and so harms ﬁrms but beneﬁts consumers, whereas the opposite is true if coverage is low. However in the long-run, when the market structure is endogenous, personalized pricing always beneﬁts consumers because it induces the socially optimal level of ﬁrm entry. We also study the asymmetric case where some ﬁrms can use consumer data to price discriminate while others cannot, and show it can be worse for consumers than when either all or no ﬁrms can personalize prices.
Keywords: personalized pricing, competition, price discrimination, consumer data