Behavior - based pricing with experience goods

Abstract

We consider a two-period model in which duopolists sell experience goods and practice behavior-based price discrimination (BBPD). We give general conditions for when firms should offer a lower price to existing customers (`pay-to-stay') or to new customers (`pay-to-switch'). We also demonstrate that unlike previous results, BBPD may intensify competition in the first period but weaken it in the second.

Reference

Romain De Nijs, and Andrew Rhodes, “Behavior - based pricing with experience goods”, Economics Letters, Elsevier, vol. 118, n. 1, January 2013, pp. 155–158.