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PRICE DISCRIMINATION IN SERVICE INDUSTRIES
(Click above to download a pdf copy of the paper)
- Abstract: We survey the existing literature on price discrimination in service industries. In scope, we limit ourselves to models of nonlinear pricing and bundling like those typically applied and analyzed in such industries. We introduce the benchmark approach commonly used in the literature and summarize the existing results on the profitability and welfare effects of price discrimination. We also survey areas of high current research activity. Next, we highlight four areas we feel are the most fruitful avenues for future research. The first is to better understand pricing-structure dependent preferences, for example in the setting of even more varied nonlinear pricing structures or in
the context of bundling. The second focuses on the need to identify dynamics in usage decisions. We suggest further exploring consumer learning under complex pricing structures andfind it
increasingly necessary to explore optimal nonlinear price schedule in a competitive setting.
- Co-authors: Anja Lambrecht (London Business School);
Katja Seim (Wharton School, University of Pennsylvania);
Naufel Vilcassim (London Business School)
Amar Cheema (University of Virginia);
Yuxin Chen (Northwestern University);
Gregory S. Crawford (University of Warwick); Kartik Hosanagar (Wharton School, University of Pennsylvania); Raghuram Iyengar (Wharton School, University of Pennsylvania);
Oded Koenigsberg (Columbia Business School);
Robin Lee (Stern School of Business, New York University); and
Ozge Sahin (Ross School of Business, University of Michigan).
- Publication: Marketing Letters, forthcoming (accepted October 2011).
- JEL: C63, D43, D82.
- First version: October 2010.
- Current version: October 2011.
- Conferences: 8th Invitational Choice Symposium, North Key Largo, FL, May 2010.
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