Personalized Pricing and Quality Differentiation

We develop an analytical framework to investigate the competitive implications of personalized pricing (PP), whereby firms charge different prices to different consumers, based on their willingness to pay. We embed personalized pricing in a model of vertical product differentiation, and show how it affects firmsâÃÂàchoices over quality. We show that firmsâÃÂàoptimal pricing strategies with PP may be non-monotonic in consumer valuations. When the PP firm has a high quality both firms raise their qualities, relative to the uniform pricing case. Conversely, when the PP firm has low quality, both firms lower their qualities. Although many firms are trying to implement such pricing policies, we find that a higher quality firm can actually be worse off with PP. While it is optimal for the firm adopting PP to increase product differentiation, the non-PP firm seeks to reduce differentiation by moving in closer in the quality space. While PP results in a wider market coverage, it also leads to aggravated price competition between firms. Since this entails a change in equilibrium qualities, the nature of the cost function determines whether firms gain or lose by implementing such PP policies. Despite the threat of first-degree price discrimination, we find that personalized pricing with competing firms can lead to an overall increase in consumer welfare.Information Systems Working Papers Serie

Personalized Pricing and Quality Differentiation

We develop an analytical framework to investigate the competitive implications of personalized pricing (PP), whereby firms charge different prices to different consumers based on their willingness to pay. We embed PP in a model of vertical product differentiation and show how it affects firms’ choices over quality. We show that firms’ optimal pricing strategies with PP may be nonmonotonic in consumer valuations. When the PP firm has high quality, both firms raise their qualities relative to the uniform pricing case. Conversely, when the PP firm has low quality, both firms lower their qualities. Although many firms are trying to implement such pricing policies, we find that a higher-quality firm can actually be worse off with PP. While it is optimal for the firm adopting PP to increase product differentiation, the non-PP firm seeks to reduce differentiation by moving in closer in the quality space. While PP results in a wider market coverage, it also leads to aggravated price competition between firms. Because this entails a change in equilibrium qualities, the nature of the cost function determines whether firms gain or lose by implementing such PP policies. Despite the threat of first-degree price discrimination, we find that PP with competing firms can lead to an overall increase in consumer welfare.NYU, Stern School of Business, IOMS Department, Center for Digital Economy Researc

Personalized Pricing and Quality Differentiation on the Internet

No changes were made in the Abstract. Please use the previous Abstract that was submittedVertical Differentiation, Personalization, Price Discrimination, Electronic Commerce,

Personalized Pricing and Quality Differentiation

We develop an analytical framework to investigate the competitive implications of personalized pricing (PP), whereby firms charge different prices to different consumers, based on their willingness to pay. We embed personalized pricing in a model of vertical product differentiation, and show how it affects firmsâÃÂàchoices over quality. We show that firmsâÃÂàoptimal pricing strategies with PP may be non-monotonic in consumer valuations. When the PP firm has a high quality both firms raise their qualities, relative to the uniform pricing case. Conversely, when the PP firm has low quality, both firms lower their qualities. Although many firms are trying to implement such pricing policies, we find that a higher quality firm can actually be worse off with PP. While it is optimal for the firm adopting PP to increase product differentiation, the non-PP firm seeks to reduce differentiation by moving in closer in the quality space. While PP results in a wider market coverage, it also leads to aggravated price competition between firms. Since this entails a change in equilibrium qualities, the nature of the cost function determines whether firms gain or lose by implementing such PP policies. Despite the threat of first-degree price discrimination, we find that personalized pricing with competing firms can lead to an overall increase in consumer welfare.Information Systems Working Papers Serie

Personalized Pricing and Quality Differentiation

We develop an analytical framework to investigate the competitive implications of personalized pricing (PP), whereby firms charge different prices to different consumers based on their willingness to pay. We embed PP in a model of vertical product differentiation and show how it affects firms’ choices over quality. We show that firms’ optimal pricing strategies with PP may be nonmonotonic in consumer valuations. When the PP firm has high quality, both firms raise their qualities relative to the uniform pricing case. Conversely, when the PP firm has low quality, both firms lower their qualities. Although many firms are trying to implement such pricing policies, we find that a higher-quality firm can actually be worse off with PP. While it is optimal for the firm adopting PP to increase product differentiation, the non-PP firm seeks to reduce differentiation by moving in closer in the quality space. While PP results in a wider market coverage, it also leads to aggravated price competition between firms. Because this entails a change in equilibrium qualities, the nature of the cost function determines whether firms gain or lose by implementing such PP policies. Despite the threat of first-degree price discrimination, we find that PP with competing firms can lead to an overall increase in consumer welfare.NYU, Stern School of Business, IOMS Department, Center for Digital Economy Researc

Study on the performance of palm methyl ester in a combustion system

Nowadays, the world is adversely affected by the rapid growth of various industries which use fossil diesel fuel as a main source to power their respective industries. As such, this phenomenon has contributed to environmental pollution apart from these natural resources are increasingly reduced thus resulting in price increments. However, biodiesel fuel has recognized by many researcher as a potential replacement of fossil fuel. A study was conducted to investigate the performance of alternative energy sources that are environmentally friendly and renewable such as palm biodiesel. Therefore, this project presents an investigation on the combustion performance of Palm Methyl Ester (PME) which also known as Palm Biodiesel in an oil burner system. Several Carotino’s palm biodiesel blends (B10, B20, and B40) also have been made by blended with Conventional Diesel Fuel (CDF). Examination of the fuel properties for each blends including CDF and PME have been carried out. The performance of the fuels have been studied based on its wall temperature profile and gas emissions generated such as nitrogen oxides (NOx) and carbon monoxide (CO). The test fuels have been burned in the oil burner combustion chamber at different equivalent ratios and using three different oil burner nozzles (1.25, 1.50 and 1.75 USgal/h). From the test, PME is the lowest emission production compared to CDF but generate a low temperature. For example, at stoichiometric mixture with nozzle 1.25 USgal/h, NOx and CO generated by PME decreased of 27% and 30% respectively compared to CDF. PME has recorded about 12% drop in an average temperature compared to the CDF at the same condition. The higher fuel flow rate used, results more heat and emission generated. The results indicated may be benefits to using biodiesel in industrial processes due to less pollution production

Software dynamic pricing by an optimization deterministic model with presence of piracy

This project presents an optimization model for pricing a monopolistic software application with presence of piracy. The purpose is raising revenue produced by product’s sale with adjusting prices in a price skimming strategy and minimizing amount of piracy. The model is a multifunctional price skimming optimization with simplex method which accompanied by deterministic and stochastic methods for calculating time intervals of each segment. Linear functions are used to describing demand of each segment. In addition a linear piracy function is proposed to making piracy a dynamic parameter. The model has the ability to apply penetration pricing and controlling market share. Windows 7 is chosen for case study. Optimizing case of Windows 7 is resulted in 8.2 percentage increase in revenue, while value of net market share is virtually constant. Therefore the developed model demonstrates its competence in optimizing revenue by modifying prices with presence of piracy. Results show that to face with piracy, range of price skimming must decreased in a way that highest price need to be intensely decreased and also lowest one must be slightly decreased. By using this strategy lowest loss in revenue due to piracy can be recurred. Effects of an escalation in piracy on proposed optimization model are: increase in number of sale, demand, selling portion, market share but decrease in price, price difference between segments, and revenue. Time intervals between successive prices, which are obtained for Windows 7, is obtained by deterministic and stochastic technics which are shown to be nearly equal due to large number of customers

Community-based strategies in action: building and sustaining a product differentiation advantage

An important reason why individuals join groups or communities is to satisfy their needs for identity. Firms might exploit this societal tendency to gain a competitive advantage. Using the strategic approach adopted by Kiehl’s, a U.S. cosmetic producer and retailer, as a source of inspiration and illustration, this paper develops a novel theoretical framework to investigate how firms interact with communities to access privileged customers’ information, from which they can build a product differentiation advantage. We argue that by adhering and supporting a well-defined set of values, Kiehl’s both achieves community membership and strengthens the sense of identity that its target communities provide to their members. These investments prompt reciprocal community member behaviors, which the company channels into its customer knowledge development process. Finally, this article describes how firm–community interactions can protect the differentiation advantage by turning products into symbols of the communities to which its customers belong.Product differentiation, Customer knowledge development, Communities, Case study