Question

In the research paper by Aydin and Ziya, “Personalized Dynamic Pricing of Limited Inventories,” Operations Research 57, no. 6 (2007):1523–1531, the authors state that research “suggests that personalized pricing is more acceptable to consumers when it is framed as offering tailored discounts from a fixed price.” Survey summaries found that “90% of customers found . . . personalized pricing unacceptable,” but “only 64% of the same customers stated that they would be bothered if other customers got better discount offers than they did.” What economic insight are these customers missing about the benefits of price discrimination in any form?

Answer 1

The customers are missing benefits in terms of how bargaining power for consumers is vital for determining market prices more efficiently as compared to flat pricing for everyone.

Consumers also lose out on the fact that the ability to price discriminate also allows need based pricing for consumers hence allowing for potential utility maximisation for consumers across income brackets.

Consumers also fail to realise that an individual can gain higher utility from paying more from certain products due to the reasons for purchase being based on the luxurious nature of the product.