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The Benefits of Personalized Pricing in a Channel

Yunchuan Liu and Z. John Zhang
Marketing Science
Vol. 25, No. 1 (Jan. - Feb., 2006), pp. 97-105
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/40057028
Page Count: 9
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The Benefits of Personalized Pricing in a Channel
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Abstract

In this note, we explore channel interactions in an information-intensive environment where the retailer can implement personalized pricing and the manufacturer can leverage both personalized pricing and entry into a direct distribution channel. We study whether a retailer can benefit from personalized pricing and how upstream personalized pricing or entry into a direct distribution channel affects the allocation of channel profit. We find that the retailer is worse off because of its own or upstream personalized pricing, even when the retailer is a monopoly. However, it may still be optimal for the retailer to embrace personalized pricing in order to reap the strategic benefit of deterring the manufacturer from selling direct and targeting end consumers.

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