Competitive Price Discrimination - Publications - Faculty & Research - Harvard Business School

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May 2023
Article

Competition in Pricing Algorithms

By: Zach Y. Brown and Alexander J. MacKay

We document new facts about pricing technology using high-frequency data, and we examine the implications for competition. Some online retailers employ technology that allows for more frequent price changes and automated responses to price changes by rivals. Motivated... View Details

Keywords: Pricing Algorithms; Pricing Frequency; Commitment; Online Competition; Price; Information Technology; Competition

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December 1990 (Revised June 1993)
Background Note

Price Discrimination

This note, which is introductory in nature, provides a classification scheme for some of the more common examples of price discrimination. For each case that is discussed, the note characterizes the appropriate market segments, the alternative product "versions," and... View Details

Keywords: Price; Segmentation

Forthcoming
Article

Dynamic Competition for Customer Memberships

By: Cristian Chica, Julian Jimenez-Cardenas and Jorge Tamayo

A competitive two-period membership (subscription) market is analyzed. Two symmetric firms charge a “membership” fee that allows consumers to buy products or services at a given unit price for both periods. Firms can choose between long- or short-term memberships. When... View Details

Keywords: Competitive Price Discrimination; Membership; Dynamic Competition; Competition; Price; Consumer Behavior; Business Model

2019
Article

More Amazon Effects: Online Competition and Pricing Behaviors

By: Alberto Cavallo

I study how online competition, with its shrinking margins, algorithmic pricing technologies, and the transparency of the web, can change the pricing behavior of large retailers in the U.S. and affect aggregate inflation dynamics. In particular, I show that in the past... View Details

Keywords: Amazon; Online Prices; Inflation; Uniform Pricing; Price Stickiness; Monetary Economics; Economics; Macroeconomics; Inflation and Deflation; System Shocks; United States

Article

Repairing the Damage: The Effect of Price Knowledge and Gender on Auto-Repair Price Quotes

By: Meghan Busse, Ayelet Israeli and Florian Zettelmeyer

In this paper we investigate whether sellers treat consumers differently on the basis of how well informed consumers appear to be. We implement a large-scale field experiment in which callers request price quotes from automotive repair shops. We show that sellers alter... View Details

Keywords: Pricing; Price Discrimination; Automobiles; Field Experiment; Information; Fairness; Price; Knowledge Use and Leverage; Internet and the Web; Gender; Service Industry; Auto Industry

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2024
Working Paper

Adjusting Prices in the Long-tail: The Role of Competitive Monitoring

By: Ayelet Israeli and Eric Anderson

Most e-commerce retailers offer a long-tail of very low demand products. Individually, these items may have low sales but collectively they are critical to the overall e-commerce business model. Because of their minimal sales, pricing is a constant challenge. The... View Details

Keywords: Algorithmic Pricing; Ecommerce; Price Monitoring; Price; Competition; Retail Industry

November–December 2017
Article

Match Your Own Price? Self-Matching as a Retailer's Multichannel Pricing Strategy

By: Pavel Kireyev, Vineet Kumar and Elie Ofek

Multichannel retailing has created several new strategic choices for retailers. With respect to pricing, an important decision is whether to offer a “self-matching policy,” which allows a multichannel retailer to offer the lowest of its online and store prices to... View Details

Keywords: Price Self-matching; Multichannel Retailing; Pricing Strategy; Online Shopping; Omnichannel; Price Discrimination; Price; Strategy; Competitive Strategy

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03 Feb 2020
Working Paper Summaries

Competition in Pricing Algorithms

Keywords: by Zach Y. Brown and Alexander MacKay

July 2020 (Revised November 2020)
Case

Pricing at Netflix

By: Elie Ofek, Marco Bertini, Oded Koenigsberg and Amy Klopfenstein

Since its launch in 1998 as “the Amazon.com of DVDs,” Netflix had evolved from a DVD rental company to a video streaming platform and producer of original films and television shows. As the company matured, it regularly increased prices and adjusted its product... View Details

July–August 2020
Article

Price Bargaining and Competition in Online Platforms: An Empirical Analysis of the Daily Deal Market

By: Lingling Zhang and Doug J. Chung

The prevalence of online platforms opens new doors to traditional businesses for customer reach and revenue growth. This research investigates platform choice in a setting where prices are determined by negotiations between platforms and businesses. We compile a unique... View Details

Keywords: Business-to-business Marketing; Platform Competition; Two-Sided Markets; Price Bargaining; Daily Deals; Structural Model; Digital Platforms; Competition; Price; Negotiation

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June 2012
Article

Pricing to Create Shared Value

By: Marco Bertini and John T. Gourville

Many companies are in competition with their customers to extract as much value as possible from every transaction. Pricing is their weapon of choice, and consumers fight back by rooting out and disseminating pricing policies that seem unfair. The problem is that... View Details

Keywords: Pricing; Marketing Strategy; Price; Customer Focus and Relationships; Customer Relationship Management; Value Creation; Fairness

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July 7, 2022
Other Article

Are Online Prices Higher Because of Pricing Algorithms?

By: Zach Y. Brown and Alexander J. MacKay

This article reviews recent work examining pricing strategies of major online retailers and the potential effects of pricing algorithms. We describe how pricing algorithms can lead to higher prices in a number of ways, even if some characteristics of these algorithms... View Details

Keywords: Pricing Algorithms; Online Marketplace; Digital Strategy; Internet and the Web; Retail Industry

Article

Competition and Cost Accounting

By: V.G. Narayanan and Michael Smith

The central theme of Competition and Cost Accounting is that strategic considerations may make it desirable for a firm to have divisions and product managers internalize something other than their true costs. In the case of transfer prices, a high transfer price... View Details

Keywords: Cost Allocation; Transfer Pricing; Decentralization; Bertrand And Cournot Competition; Cost Accounting

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winter 1989
Article

Price Competition in Multi-Market Duopolies

By: R. Lal and Carmen Matutes

Keywords: Price; Competition; Duopoly and Oligopoly

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summer 1990
Article

Price Promotions: Limiting Competitive Encroachment

Keywords: Price; Competition

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June 2018
Case

American Airlines' Value Pricing (Abridged)

By: Alvin J. Silk and Sunil Gupta

This is an abridged version of the 1992 case where American Airlines (AA) launched "Value Pricing" in an attempt to simplify the pricing structure of the airline industry. AA expected that this plan would benefit not only consumers, but also AA and the entire airline... View Details

Keywords: Consumer Marketing; Market Segmentation; Pricing; Pricing Strategy; Demand Analysis; Competition; Marketing; Segmentation; Price; Strategy; Demand and Consumers; Analysis; Air Transportation Industry

1986
Working Paper

Price Competition with a Distribution of Switch Costs and Reservation Prices

By: Jerry R. Green and Suzanne Scotchmer

When there is a distribution of switch costs and of reservation prices for a good, and marginal cost of producing the good is zero, equilibrium in pure price strategies may (and sometimes must) exhibit price dispersion. Equilibrium may or may not exist, and there may... View Details

Winter 2021
Article

Mobile Internet Usage and Usage-based Pricing

By: Jeffrey Prince and Shane Greenstein

Using data on mobile Internet usage of thousands of individuals, we provide some of the first analyses linking mobile usage to key demographics such as income. We find a reverse-U relationship between mobile Internet usage and income—notably different than the... View Details

Keywords: Mobile Internet Usage; Pricing Strategy; Internet and the Web; Mobile and Wireless Technology; Demographics; Income; Price; Strategy

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2021
Working Paper

Competitive Two-Part Tariffs

By: Jorge Tamayo and Guofu Tan

We study competitive two-part tariffs in a model of asymmetric duopoly firms that offer (vertically and horizontally) differentiated products. We show that the sign of the markup for each product depends on the average expected demand among all customers as well as the... View Details

Keywords: Product Differentiation; Two-part Tariffs; Marginal-cost Pricing; Cross-subsidization; Competition; Price

July 2024 (Revised January 2025)
Case

Dynamic Pricing at Wendy's: Where's the Beef?

By: Elie Ofek, Alicia Dadlani and Martha Hostetter

In early 2024, Wendy’s new CEO announced on an earnings call that the company would install digital menus in its US locations so it could begin testing dynamic pricing—changing prices up or down in response to shifts in supply and demand – as well as allow engaging in... View Details

Keywords: Dynamic Pricing; Marketing Strategy; Price; Technology Adoption; Consumer Behavior; AI and Machine Learning; Customer Focus and Relationships; Policy; Food and Beverage Industry

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