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Price discrimination in service industries

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Abstract

This article outlines recent methods and applications directed at understanding the profit and consumer welfare implications of increasingly prevalent price discrimination strategies in the service sector. These industries are typically characterized by heterogeneity in consumers’ valuation and usage of the service, resale constraints, and a focus on price as the service’s key attribute. The article focuses on how firms use nonlinear pricing or bundling strategies to benefit from the heterogeneity in consumer demand. We describe the basic economic model commonly used in the literature to analyze such strategic choices and present recent methodological improvements to this benchmark. A discussion of existing applications and future research opportunities concludes the article.

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Authors and Affiliations

  1. London Business School, London, UK

    Anja Lambrecht & Naufel Vilcassim

  2. Wharton School, University of Pennsylvania, Philadelphia, PA, USA

    Katja Seim, Kartik Hosanagar & Raghuram Iyengar

  3. University of Virginia, Charlottesville, VA, USA

    Amar Cheema

  4. Northwestern University, Evanston, IL, USA

    Yuxin Chen

  5. University of Warwick, Coventry, UK

    Gregory S. Crawford

  6. London Business School, London, UK

    Oded Koenigsberg

  7. Stern School of Business, New York University, New York, NY, USA

    Robin Lee

  8. University of Texas at Austin & CEPR, Austin, TX, USA

    Eugenio J. Miravete

  9. Carey Business School, Johns Hopkins University, Baltimore, MD, USA

    Ozge Sahin

Authors
  1. Anja Lambrecht
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  2. Katja Seim
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  3. Naufel Vilcassim
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  4. Amar Cheema
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  5. Yuxin Chen
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  6. Gregory S. Crawford
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  7. Kartik Hosanagar
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  8. Raghuram Iyengar
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  9. Oded Koenigsberg
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  10. Robin Lee
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  11. Eugenio J. Miravete
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  12. Ozge Sahin
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Corresponding author

Correspondence to Anja Lambrecht.

Additional information

This paper draws on discussions from the conference session at the Eighth Triennial Choice Symposium at Key Largo, FL, USA co-chaired by the first three authors.

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Lambrecht, A., Seim, K., Vilcassim, N. et al. Price discrimination in service industries. Mark Lett 23, 423–438 (2012). https://doi.org/10.1007/s11002-012-9187-0

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