Strategic loyalty reward in dynamic price Discrimination

Pre-print, Working paper: This paper proposes a dynamic model of duopolistic competition under behaviorbased price discrimination with the following property: in equilibrium, a firm may reward its previous customers although long term contracts are not enforceable. A firm can offer a lower price to its previous customers than to its new customers as a strategic means to hamper its rival to gather precise information on the young generation of customers for subsequent profitable behavior-based pricing. The result holds both with myopic and forward-looking, impatient enough consumers.

Author(s)

Bernard Caillaud, Romain de Nijs

Date of publication
  • 2011
Keywords JEL
L11 L40 M31
Keywords
  • Price discrimination
  • Dynamic pricing
  • Loyalty reward
Internal reference
  • PSE Working Papers n°2011-29
Version
  • 1