Experimental Evidence of Behavior Based Pricing
Abstract: Sellers have long engaged in various forms of price discrimination. However, recent technological advances have given sellers even more information about their customers including the ability to track people across shopping episodes. With such information they can either attempt to reward loyalty or poach from rivals. In addition, recent theoretical work suggests that loyalty discounts are likely to be implemented when customer preferences are not stationary and sellers can pre-commit to prices for repeat buyers, but otherwise repeat buyers can be expected to pay the same or more than new buyers. The paper reports the results of a series of market experiments, which vary the degree of heterogeneity in shopper preferences between periods and the ability of sellers to pre-commit to prices for loyal customers. The results of our experimental study generally support the comparative static results of the theoretical model, although there is less difference between prices in different treatments than predicted. This paper is part of a research project OP Education “Increasing the quality of doctoral studies and support of the international research at the FNE, University of Economics in Bratislava” (ITMS 26140230005), Modern education for knowledge society (co-financed by the European Union); research grant VEGA No.: 1/0232/13 and research grant VEGA No.: 1/0431/14 provided by the Ministry of Education, Science, Research and Sport of the Slovak Republic.
