Work

Dynamic pricing: when to entice brand switching and when to reward consumer loyalty

Year: 2010

Type: article

Abstract: This article develops a theory of dynamic pricing in which firms may offer separate prices to different consumers based on their past purchases. Brand preferences over two periods are described by a copula admitting various degrees of positive dependence. When commitment to future prices is infeasible, each firm offers lower prices to its rival's customers. When firms can commit to future prices, consumer loyalty is rewarded if preference dependence is low, but enticing brand switching occurs if preference dependence is high. Our theory provides a unified treatment of the two pricing policies and sheds light on observed practices across industries.

Source: The RAND Journal of Economics

DOI: 10.1111/j.1756-2171.2010.00116.x

Authors: Yongmin Chen, Jason Pearcy

Institutions: University of Colorado Boulder, University of Colorado System, Zhejiang University, Montana State University

Language: English

Topic: Consumer Market Behavior and Pricing

Subfield: Marketing

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2054868648

FWCI: 13.3

Cites: 20

Cited by: 107

Related to: 10