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on Marketing |
| By: | Yiquan Gu; Leonardo Madio; Carlo Reggiani |
| Abstract: | The unprecedented access of firms to consumer level data not only facilitates more precisely targeted individual pricing but also alters firms’ strategic incentives. We show that exclusive access to a list of consumers can provide incentives for a firm to endogenously assume the price leader’s role, and so to strategically manipulate its rival’s price. Prices and profits are non-monotonic in the length of the consumer list. For an intermediate size, price leadership entails a semi-collusive outcome, characterized by supra-competitive prices and low consumer surplus. In contrast, for short or long lists of consumers, exclusive data availability intensifies market competition. |
| Keywords: | exclusive data, price leadership, personalized pricing, price discrimination |
| JEL: | D43 K21 L11 L13 L41 L86 M21 M31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7853&r=all |
| By: | Oksana Loginova (Department of Economics, University of Missouri) |
| Abstract: | The focus of this theoretical study is price competition when some firms operate their own branded websites while others sell their products through an online platform, such as Amazon Marketplace. On one hand, selling through Amazon expands a firm's reach to more customers, but on the other, starting a website can help the firm to increase the perceived value of its product, that is, to build brand equity. In the short run the composition of firms is fixed, whereas in the long run each firm chooses between Amazon and its own website. I derive the equilibrium prices and profits, analyze the firms' behavior in the long run, and compare the equilibrium outcome with the social optimum. Comparative statics analysis reveals some interesting results. For example, I find that the number of firms that choose Amazon may go down in response to an increase in the total number of firms. A pure-strategy Nash equilibrium may not exist; I show that price dispersion among the firms of the same type is more likely in less concentrated markets and/or when the increase in the perceived value of the product is relatively small. |
| Keywords: | pricing, competition, platforms, online marketplace, Amazon, brand equity |
| JEL: | C72 D43 L11 L13 M31 |
| Date: | 2019–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:1906&r=all |