Pricing with customer recognition

This article studies the dynamic effects of behaviour based price discrimination and customer recognition in a duopolistic market where the distribution of consumers preferences is discrete Consumers are myopic and firms are forward looking In the static and first period equilibrium firms choose prices with mixed strategies When price discrimination is allowed forward-looking firms have an incentive to avoid customer recognition thus the probability that both will have positive first-period sales decreases as they become more patient Furthermore an asymmetric equilibrium sometimes exists yielding a 100-0 division of the first-period sales As a whole price discrimination is bad for profits but good for consumer surplus and welfare (C) 2010 Elsevier BV All rights reserved