Behavior-Based Pricing in Vertically Differentiated Industries

Rhee, Ki-Eun; Thomadsen, Raphael

doi:10.1287/mnsc.2016.2467

Cited by 64 publications

(32 citation statements)

References 26 publications

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“…The traditional products and green product indexed j ∈ (T1, T2, G), are located at three ends of the triple Hotelling line as shown in Figure 1., respectively. Following Kuksov and Lin [39], Rhee and Thomadsen [40], and Jing [41], we assume consumers derive a base value V j = v b + ρv from the product j, where v b ≥ 0 is a constant that represents basic utility to all consumers when the product meets the minimum quality standard v. In other words, v b captures the reservation value of a consumer who does not need more than a basic product of minimal quality. v ∈ [ v, +∞) defines the product quality and valuation where ρ ∈ (0, 1] is a scale factor that reflects consumers' attitudes to green products.…”

Section: Firmsmentioning

confidence: 99%

Sustainable Supply Chain Decisions under E-Commerce Platform Marketplace with Competition

2021

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Motivated by the industrial observation that the e-commerce platform marketplaces (e.g., Amazon) are increasingly launching sustainable strategies, this study aims to build an analytical framework to guide managers on making sustainable decisions. This study builds a stylized game-theoretical model in the sustainable supply chain context, where the competitive traditional product manufacturers sell their products through the platform’s marketplace, while the platform decides whether to introduce the green products and the pricing strategy. We find that, when the evaluation difference for the green product is sufficiently low, the introduction of the green product by the platform benefits the manufacturers (or third-party sellers). Interestingly, a higher platform fee makes a higher likelihood of a win-win situation between the platform and manufacturers. Moreover, when consumers value green products sufficiently higher than traditional products, the traditional products’ manufacturers can also benefit from the green product entry.

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Section: Firmsmentioning

confidence: 99%

Sustainable Supply Chain Decisions under E-Commerce Platform Marketplace with Competition

2021

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“…Zhang (2011) further shows that when firms customize the horizontal attributes of products, profits become even lower than when firms only practice BBP. Research has also found some contexts in which firms can profit from BBP, such as when consumers have heterogeneous demand and preferences change over time (Shin and Sudhir 2010), asymmetric firms determine product quality (Jing 2017), consumers care about price fairness (Li and Jain 2016), competing products are vertically differentiated (Rhee and Thomadsen 2017), both manufacturers and retailers use BBP (Li 2018), or consumers are sufficiently averse to loss on match quality (Amaldoss and He 2019).…”

Section: Related Literaturementioning

confidence: 99%

Transparency of Behavior-Based Pricing

Xi¹,

Li²,

Wang³

2019

Journal of Marketing Research

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Behavior-based pricing (BBP) refers to the practice in which firms collect consumers’ purchase history data, recognize repeat and new consumers from the data, and offer them different prices. This is a prevalent practice for firms and a worldwide concern for consumers. Extant research has examined BBP under the assumption that consumers observe firms’ practice of BBP. However, consumers do not know that specific firms are doing this and are often unaware of how firms collect and use their data. In this article, the authors examine (1) how firms make BBP decisions when consumers do not observe whether firms perform BBP and (2) how the transparency of firms’ BBP practice affects firms and consumers. They find that when consumers do not observe firms’ practice of BBP and the cost of implementing BBP is low, a firm indeed practices BBP, even though BBP is a dominated strategy when consumers observe it. When the cost is moderate, the firm does not use BBP; however, it must distort its first-period price downward to signal and convince consumers of its choice. A high cost of implementing BBP serves as a commitment device that the firm will forfeit BBP, thereby improving firm profit. By comparing regimes in which consumers do and do not observe a firm’s practice of BBP, the authors find that transparency of BBP increases firm profit but decreases consumer surplus and social welfare. Therefore, requiring firms to disclose collection and usage of consumer data could hurt consumers and lead to unintended consequences.

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“…Acquiring such information makes it feasible for enterprises to set behavior-based pricing [6]; enterprises divide consumers into "loyal customers" and "poaching customers" [7]. For "loyal customers" and "poaching customers", the enterprise will implement different degrees of premium or discount as per their historical purchase information [8,9]. There are many factors that affect the pricing of enterprise behavior.…”

Section: Literature Reviewmentioning

confidence: 99%

Behavior-Based Pricing of Organic and Conventional Agricultural Products Based on Green Subsidies

Liu

Lan

et al. 2019

Sustainability

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This study considers two types of consumers: those without preference difference, and those that prefer organic agricultural products. It constructs two two-stage hoteling behavior-based pricing models and solves for the optimal loyalty price and poaching price of the two types of enterprises. It analyzes the influence of subsidies on the pricing of the two types of products and corporate profits. The study also undertakes numerical simulation for further analysis, finding that green subsidies are negatively correlated with the loyalty price and poaching price of organic agricultural products, but that they will not affect the difference between the two types of prices. When the inherited market of organic agricultural products is dominant, the size of green subsidy affects the relationship between the prices of the two types of products. However, when organic agricultural products do not dominate the initial market, green subsidies do not affect the size of the relationship between the two prices of the two types of products. When the initial market position of organic agricultural products is different, the types of competing customers are different between the two types of enterprises, and the intensity of competition will increase with the increase of subsidies. Green subsidies increase the profits of organic agricultural enterprises and reduce the profits of conventional agricultural enterprises.

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Behavior-Based Pricing in Vertically Differentiated Industries

Cited by 64 publications

References 26 publications

Sustainable Supply Chain Decisions under E-Commerce Platform Marketplace with Competition

Sustainable Supply Chain Decisions under E-Commerce Platform Marketplace with Competition

Transparency of Behavior-Based Pricing

Behavior-Based Pricing of Organic and Conventional Agricultural Products Based on Green Subsidies

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