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The Benefits of Personalized Pricing in a Channel
Yunchuan Liu and Z. John Zhang
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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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.
Marketing Science © 2006 INFORMS