Price discrimination based on purchase behavior and service cost in competitive channels

  • Man Xu
  • Wansheng TangEmail author
  • Chi Zhou


With the recent emergence of cloud computing and big data technologies, collection of consumers’ information is widespread. Retailers use consumers’ purchase history and consumptive habits data to price discriminate between current and new, high-cost and low-cost consumers. We investigate behavior-based pricing (BBP) and consumers cost-based pricing (CCP) simultaneously in a competitive two-period market in which bricks and clicks retailers sell products to high-cost-type and low-cost-type consumers during two periods. We examine how the price discrimination affects the channel members’ prices, market shares and profits. We find that dual price discriminations (BBP and CCP) decrease the service cost advantage retailer’s profit, but increase the service cost disadvantage retailer’s profit if the consumer’s travel cost is low. Compared the market shares of retailers, it is interesting that a cost advantage retailer serves more type-H consumers under the case of BBP and CCP than other cases. In addition, our results illustrate that cost disadvantage retailers prefer to reward the current consumers in the second period. Additionally, we find that consumers may benefit from price discrimination that they face a lower price in the case of BBP and CCP than other cases under certain conditions. Even more egregious, the current type-H consumers served by the cost advantage retailer enjoy a lower price than the type-L consumers served by the competitor.


Price discrimination Behavior-based pricing Consumer cost-based pricing Bricks and clicks channels Competition 



This work was supported by the National Natural Science Foundation of China (Nos. 71771164 and 71702129), Humanity and Social Science Youth Foundation of Ministry of Education of China (No. 17YJC630232).

Compliance with ethical standards

Conflict of interest

All authors declare that they have no conflict of interest.

Human and animal rights

This article does not contain any studies with human participants or animals performed by any of the authors.


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.College of Management and EconomicsTianjin UniversityTianjinChina
  2. 2.School of ManagementTianjin University of TechnologyTianjinChina

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