Author(s)

KaiHua Bao^1*, ZhiQiang Zhang², Ting Zhang¹

Affiliation(s)

¹Research Institute of Machinery Industry Economic & Management, Beijing 100055, China.

²School of Economics and Management, University of Science and Technology Beijing, Beijing 100083, China.

Corresponding Author

KaiHua Bao

ABSTRACT

With the development of big data and platform economy, platforms can easily gather consumer information through first-period purchase and exercise personalized pricing. When consumers realize it, they may engage in identity management to bypass the platform’s attempt to price discriminate. Therefore, it is significant to clarify the impact of identity management on platform’s behavior-based price discrimination, and whether platforms continue to compete consumers if they realize that consumers may engage in identity management. We introduce the identity management into the standard framework of behavior-based price discrimination, then we analyze and compare equilibrium results with and without identity management. The main findings are as the follows: (i) when consumers are active in identity management, the competition between platforms is intensified in the information collection stage, but it is softened in the information application stage, and platforms can exercise perfect price discrimination to consumers. (ii) The consumer identity management leads to lower consumer surplus and higher social welfare. When consumers become farsighted, platforms can be better off. (iii) platforms still have incentives to compete with consumers and gather consumer information, even though platforms predict that consumers are active in the identity management. (iv) Compared to one-sided market, the consumer identity management in two-sided market makes platforms more willing to implement perfect price discrimination.

KEYWORDS

Behavior-based price discrimination; Personalized pricing; Identity management; Platform

CITE THIS PAPER

KaiHua Bao, ZhiQiang Zhang, Ting Zhang. Can consumer's identity management affect platform's behavior-based personalized pricing? Eurasia Journal of Science and Technology. 2026, 8(1): 31-55. DOI: https://doi.org/10.61784/ejst3132.

REFERENCES

[1] Esteves RB, Resende J. Competitive targeted advertising with price discrimination. Marketing Science, 2016, 35(4): 576-587.

[2] Mohammed R. How retailers use personalized prices to test what you’re willing to pay. Harvard Business Review, 2017. https://hbr.org/2017/10/how-retailers-use-personalized-prices-to-test-what-youre-willing-to-pay.

[3] Fudenberg D, Villas-Boas J M. Behavior-based price discrimination and consumer recognition. Hendershott T, ed. Economics and Information Systems, Handbooks in Information Systems, 2006(1): 377–436.

[4] Hann IH, KL Hui, SY T Lee, et al. Overcoming online information privacy concerns: An information-processing theory approach. Journal of Management Information Systems, 2007, 24(2): 13-42.

[5] Chen M, Gong Y. Behavior-based pricing in on-demand service platforms with network effects. IEEE Transactions on Engineering Management, 2024, 71: 4160-4174.

[6] Acquisti A. Identity management, privacy, and price discrimination. IEEE Security & Privacy, 2008, 6(2): 46–50.

[7] Taylor R. Consumer privacy and the market for consumer information. RAND Journal of Economics, 2004, 35(4): 631-650.

[8] Acquisti A, Varian H R. Conditioning prices on purchase history. Marketing Science, 2005, 24(3): 367-381.

[9] Belleflamme P, Vergote W. Monopoly price discrimination and privacy: The hidden cost of hiding. Economics Letters, 2016, 149: 141-144.

[10] Shaffer G, Zhang Z J. Competitive coupon targeting. Marketing Science, 1995, 14(4): 395-416.

[11] Chen Y. Paying consumers to switch. Journal of Economics and Management Strategy, 1997, 6(4): 877-897.

[12] Villas-Boas J M. Dynamic competition with consumer recognition. RAND Journal of Economics, 1999, 30(4): 604-631.

[13] Fudenberg D, Tirole J. Consumer poaching and brand switching. RAND Journal of Economics, 2000, 31(4): 634-57.

[14] Villas-Boas J M. Price cycles in markets with consumer recognition. RAND Journal of Economics, 2004, 35(3): 486-501.

[15] Pazgal A, Soberman D. Behavior-based discrimination: Is it a winning play, and if so, when? Marketing Science, 2008, 27(6): 977-994.

[16] Chen Y, Zhang Z J. Dynamic targeted pricing with strategic consumers. International Journal of Industrial Organization, 2009, 27(1): 43-50

[17] Esteves RB. Pricing with consumer recognition. International Journal of Industrial Organization, 2010, 28(6): 669-681.

[18] Fudenberg D, Villas-Boas J M. Price discrimination in the digital economy. Peitz M, Waldfogel J eds. The Oxford Handbook of the Digital Economy, 2012: 254-72.

[19] Jing B. Behavior-based pricing, production efficiency, and quality differentiation. Management Science, 2017, 63(7): 2365-2376.

[20] Rhee KE, Thomadsen R. Behavior-based pricing in vertically differentiated industries. Management Science, 2017, 63(8): 2729-2740.

[21] Li K J, Jain S. Behavior-based pricing: An analysis of the impact of peer-induced fairness. Management Science, 2016, 62(9): 2705-2721.

[22] Carroni E. Behavior-based price discrimination with cross-group externalities. Journal of Economics, 2018, 125(2): 137-157.

[23] Thisse JF, Vives X. On the strategic choice of spatial price policy. American Economic Review, 1988, 78(1): 122-137.

[24] Chen Y, Iyer G. Consumer addressability and customized pricing. Marketing Science, 2002, 21(2): 197-208.

[25] Shaffer G, Zhang Z J. Competitive one-to-one promotions. Management Science, 2002, 48(9): 1143-1160.

[26] Choudhary V, Ghose A, Mukhopadhyay T, et al. Personalized pricing and quality differentiation. Management Science, 2005, 51(7): 1120-1130.

[27] Ghose A, Huang KW. Personalized pricing and quality customization. Journal of Economics and Management Strategy, 2009, 18(4): 1095-1135.

[28] Matsumura T, Matsushima N. Should firms employ personalized pricing? Journal of Economics and Management Strategy, 2015, 24(4): 887-903.

[29] Zhang J. The perils of behavior-based personalization. Marketing Science, 2011, 30(1): 170-186.

[30] Choe C, King S, Matsushima N. Pricing with cookies: Behavior-based price discrimination and spatial competition. Management Science, 2018, 64(12): 5669-5687.

[31] Chen Z, Choe C, Matsushima N. Competitive personalized pricing. Management Science, 2020, 66(9): 4003-4023.

[32] Conitzer V, Taylor C R, Wagman L. Hide and seek: Costly consumer privacy in a market with repeat purchases. Marketing Science, 2012, 31(2): 277-292.

[33] Montes R, Sand-Zantman W, Valletti T. The value of personal information in online markets with endogenous privacy. Management Science, 2019, 65(3): 1342-1362.

[34] Laussel D. Do Firms always Benefit from the Presence of Active Consumers? Applied Economics, 2023, 55(20): 1-16.