Academic literature on the topic 'Price discrimination'

Advances in information technologies have increasingly enabled firms to use consumers' past purchasing data to charge different prices to its own customers and to those customers that in some sense belong to the rival firm. At first glance this new form of price discrimination seems to be lucrative as it allows a firm to generate profitable incremental sales without damaging profits it can extract from its own customer base. However, as behaviour-based price discrimination gains popularity many interesting questions arise. Is it, really, in the best interest of firms to recognise customers with different past behaviour and to price discriminate accordingly? Or is it rather in their interest to avoid any possible learning and thereby price discrimination practices? Should consumers hide their true types, i.e., should they behave anonymously? Further, should government regulation restrict information collection and price discrimination practices? The study of these questions is the study of the profit and welfare effects of behaviourbased price discrimination. This is the central issue of this thesis. With that in mind, this thesis addresses three theoretical models. The first one is based on the hypothesis that the ability of firms to predict the preferences of individual customers for the purpose of price discrimination is less than perfect but is constantly improving due to advances in information technologies. Here the main goal will be to investigate how profits, consumer surplus and welfare evolve as price discrimination is based on more accurate information. The second model is a natural sequel of the former as it tries to model how firms might obtain a signal of a consumer's preferences. Whether or not a given consumer bought from the firm previously might be used as an accurate signal of a consumer's preferences. A key issue here will be to examine whether or not it is in the interest of firms to avoid learning and price discrimination and how can they attain that goal. Finally, the third model studies the interaction between purely informative advertising and price discrimination based on customers' past behaviour. As without advertising consumers are left out of the market, the welfare effects of price discrimination are guided by how will price discrimination affect each firm's advertising decisions in relation to the social optimal level of advertising.

Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2015.<br>Cataloged from PDF version of thesis. "Chapter 3, co-authored with Gaston Illanes"--Page 2.<br>Includes bibliographical references (pages 123-126).<br>Chapter 1 studies price discrimination in advertising sales to Political Action Committees (PACs) in the 2012 Presidential Election. These groups have grown rapidly - expenditures neared $500 million in the 2012 presidential election - and their effect on elections depends on regulation and its interaction with imperfect competition. While the government tightly proscribes station behavior vis-a-vis official campaigns, it does not protect Political Actions Committees (PACs). Television stations potentially wield considerable power to shape access to the electorate. Using novel data on prices paid for individual ad spots from the 2012 presidential election, I find PACs pay a 40% markup above campaign rates, and that there are differences in prices paid by Republican and Democratic groups for indistinguishable purchases. I then develop and estimate a model of political demand for ad spots, exploiting misalignments of state borders and media markets to address potential price endogeneity. Findings indicate that pricing to PACs reflects buyer willingness-to-pay for viewer demographics. Chapter 2 investigates spillover effects of regulation protecting campaign advertising purchases, a most favored nation clause. This regulation guarantees campaigns the lowest rate received by any advertiser, incentivizing stations to sell less airtime to commercial advertisers to buoy campaign prices. Using spot-level data on presidential campaign advertising purchases from 2012, I find that campaign ad prices drop following the institution of rate regulation (sixty days preceding election day). I then develop a model of station price discrimination, and estimate the effect of regulation on campaign and commercial prices relative to a counterfactual without regulation. Chapter 3, co-authored with Gaston Illanes, studies the effects of potential entry on market outcomes in the context of Washington state's 2012 privatization of liquor sales. Theory indicates that entry, and even the threat of entry, plays a key role in discipling market outcomes. We exploit the post-reform licensure requirement that stores have 10,000 square feet of retail space to estimate the impact of an additional store on price competition. We compare prices and product variety in markets with stores just above versus just below the square footage cutoff.<br>by Sarah N. S. Moshary.<br>Ph. D.

PONTIFÍCIA UNIVERSIDADE CATÓLICA DO RIO DE JANEIRO<br>COORDENAÇÃO DE APERFEIÇOAMENTO DO PESSOAL DE ENSINO SUPERIOR<br>CONSELHO NACIONAL DE DESENVOLVIMENTO CIENTÍFICO E TECNOLÓGICO<br>PROGRAMA DE SUPORTE À PÓS-GRADUAÇÃO DE INSTS. DE ENSINO<br>Nesta dissertação, estuda-se a discriminação de preços no transporte aéreo brasileiro. A base de dados, construída a partir das respostas dos passageiros na Pesquisa O/D, contém informações a que as companhias aéreas não têm acesso. Passageiros com maior renda e que viajam a trabalho pagam preços maiores, e o uso de vários controles nas regressões permite concluir que isso é explicado, em parte, por discriminação de preços. Desenvolve-se um modelo empírico de discriminação de preços, em que uma firma utiliza os atributos das passagens para prever a disposição a pagar dos consumidores e, assim, estabelecer os preços. Empregando as estimativas dos parâmetros do modelo, consideram-se cenários contrafactuais em que há restrições sobre a discriminação de preços. Em média, restringir a discriminação de preços geraria uma redução do excedente do consumidor da ordem de 10 por cento.<br>This dissertation studies price discrimination in the Brazilian airline market. The data used are from the O/D Survey, which involved interviews with passengers. This enables us to have in our data set information that airlines do not have. Business travelers and those with higher incomes pay higher prices. By including several controls in the regressions, we obtain evidence that this is due to price discrimination, at least to some extent. We develop an empirical model of price discrimination, in which a firm uses ticket attributes to predict consumers’ willingness to pay and thus sets its prices. The model’s estimated parameters are used to construct counterfactual scenarios where price discrimination is constrained. On average, restricting price discrimination would reduce consumer surplus by approximately 10 per cent.

This dissertation consists of three essays examining how and why firms set prices in markets. In particular, this dissertation shows how firms may utilize nonlinear pricing to price discriminate, how firms may experiment with the prices they set to learn about the demand function in the market they serve in later periods and the effects of these pricing strategies on consumer welfare. In Essay 1, I show how firms in the milk market use nonlinear price schedules -- quantity discounts -- to price discriminate and increase profits. I find that firms have a greater ability to price discriminate on their own ``private label'' products rather than regional branded that they sell alongside their own. Though some consumers benefit from a lower price as a result of the price discrimination, total consumer surplus is lower than if the store had to offer a fixed price per unit. Additionally, I compare my structural demand estimates, which using the Nielsen household panel data include consumer demographic information and actual household choices, to the standard approach in the literature on price discrimination that uses only market level data. By doing so I find that ignoring demographic information and actual consumer choices leads to biased parameter estimates. In the case of the milk market, the biased parameter estimates due to ignoring household demographic information and actual consumer choices lead to underestimating welfare harm to consumers on average. After finding that price discrimination harms consumers overall in this market, I quantify which consumer demographic are better off and which are worse off. I find that households with children and low income households with children are the only households to benefit from the price discriminatory practices of firms in this market. Since these groups are particularly vulnerable, I suggest that policymakers take no action to correct this market, as any action will directly hurt these consumer groups. In Essay 2, I study how firms learn about the demand in a new market by exploiting a significant change in Washington's state's liquor laws. In 2012, the state of Washington switched from a price-controlled state-store system of selling liquor to one in which private sellers could sell liquor with minimal restrictions on price and range of products. As a result, a heterogeneous group of firms entered the liquor market across the state with little knowledge of the regional demand for alcohol in the state of Washington across heterogeneous localities. Using the Nielsen retail scanner data I am able to observe the variation in pricing and offerings seasonally and over time to see if there is convergence in offerings and prices, and how quickly that convergence occurs across different localities depending on local demographics and competition. I also investigate the extent to which the variation is "experimentation'' by the firms, i.e., the firms purposely experimenting to learn more about demand and the extent that local demographics and competition can affect the experimentation and whether there are spill-overs from local competition (i.e. do firms learn from each other and does this effect how much they experiment and how quickly they learn). My main findings are that over time, firms within this market have learned better how to price discriminate over the holiday season; firms experiment more with prices for the pint sized products than the larger sizes; and that menu of options that firms have offered has been expanding but at a slower rate, suggesting that they are approaching a long-run steady state for the optimal menu of options.

The purpose of this thesis is to develop a policy towards anticompetitive price discrimination in New Zealand. Price discrimination occurs where the ratio of price to cost in two sales differs. Legislation against price discrimination may be enacted as part of our Competition Law, a set of laws designed to promote efficiency and competition in industry and commerce. The first section of this thesis examines the economics of price discrimination and its effects on efficiency, income distribution and competition. We conclude that the effects are ambiguous and depend upon the circumstances in which the discrimination is practiced. However we conclude that systematic price discrimination can be harmful to competition, whilst unsystematic price discrimination can promote competition and that there are a priori grounds for anti-price discrimination legislation. The second section examines specific approaches taken to price discrimination legislation. Particular emphasis is placed on the U.S. Robinson-Patman Act which is one of the most extensively litigated price discrimination laws in the world. A review of the implementation of this Act shows that it has failed to promote competition or increase efficiency. In fact, it has done more to inhibit these goals than promote them. We conclude that there are conceptual problems with antiprice discrimination legislation and this conclusion is reinforced by a study of the Australian price discrimination law. We therefore examine the conceptual framework in which price discrimination is controlled in other developed countries such as the United Kingdom, Canada, Eire, France, West Germany and the EEC. We conclude generally that price discrimination is a problem of monopoly and should be treated as such. The final part of this thesis reviews price discrimination law in New zealand and suggests a policy that would align the Commerce Act with our conclusion that legislation against price discrimination is undesirable.

The lack of information on price discrimination regarding which characteristics of the client are used and how they influence the definition of the initial price offered in a competitive non-regulated taxi market is the main problem that encouraged this investigation. The study differs from other studies in its use of an experimental research method which allowed analysis of the problem as close as possible to the natural context of the phenomenon. Interviews with 10 taxi drivers produced six variables affecting the process of price definition. A group of 16 people matching those variables collected rates offered by a random sample of taxi drivers. Due to the lack of normality in the distribution of the prices collected, an ordered regression model was implemented. The findings are that price discrimination exists in a nonregulated market such as that of taxis in Lima and that phenotype and the accent of the client are individual characteristics that have a significant influence on the initial price offer. The results confirm that price discrimination is applied in a context like the one of the study, but the question remains as to why it is naturally present and what conditions make it work<br>Tesis