Behavior - based pricing with experience goods

Romain De Nijs, and Andrew Rhodes


We consider a two-period model in which duopolists sell experience goods and practice behavior-based price discrimination (BBPD). We give general conditions for when firms should offer a lower price to existing customers (`pay-to-stay') or to new customers (`pay-to-switch'). We also demonstrate that unlike previous results, BBPD may intensify competition in the first period but weaken it in the second.

Published in

Economics Letters, Elsevier, vol. 118, n. 1, January 2013, pp. 155–158