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Title :Behavioral-based price discrimination
Creator :Κεντρωτά, Αναστασία
Contributor :Γκενάκος, Χρήστος (Επιβλέπων καθηγητής)
Athens University of Economics and Business, Department of Economics (Degree granting institution)
Type :Text
Extent :83p.
Language :en
Abstract :In the first chapter of the thesis, we will refer to some pricing practices and their effects on consumers’ behavior. Even though the classical economic theory suggests that people will act rationally using benefit and cost analysis to make a decision, scientific research shows that this is not the case. People do not have the ability to recognize and evaluate all the available information in today’s complex environment. So we will refer to drip pricing, opt-in/opt-out, reference pricing, the use of word ‘free’, bait pricing, complex pricing and time limited offers.In the next chapter, I’m going to discuss how the collection of customer data can be used in price discrimination and how this can affect the profitability of the firm. We will examine homogenous, non-durable good duopolies to find out the competitive effects of customer recognition. In this part, we are trying to understand why firms invest in the collection of customer data, how it affects their ability to discriminate and how this is profitable. The advances of technology and the willingness of customers to share their identities make it easier to collect the data that the firms need in order to automatize pricing based on various aspects.Finally, in the last chapter, we will examine competition in the presence of behaviorally biased or boundedly rational consumers. Consumers’ behavior may deviate from the idea of perfect rationality in many different ways. Consumers may suffer from cognitive limitations thus making the comparison of products and prices very difficult. Additionally, consumers may be prone to various behavioral biases, such as being overoptimistic about the future or overconfident concerning their ability to avoid accidents, or being afraid to lose compared to the status quo. However, there are remedies that can improve market outcomes. We will discuss consumer learning and education, reputation building by firms, information leading to improved market transparency and the standardization of information. However, each of these remedies is effective in particular cases. For example, learning and education are used in cases where errors can be detected and realizes ex post. In cases where firms have a motive to exploit errors, there is also a motive to establish a reputation for not engaging in such exploitation. Whenever consumers need to engage in active research before purchasing, better information is very important. Last but not least, when consumers have cognitive limitations it is not only the available information that matter but also its presentation
Subject :Pricing practices
Consumer behavior
Behavioral-Based Price Discrimination (BBPD)
Date :31-01-2013
Licence :

File: Kentrota_2013.pdf

Type: application/pdf