Working paper

Personalized Pricing and Competition

Andrew Rhodes, and Jidong Zhou


We study personalized pricing (or first-degree price discrimination) in a general oligopoly model. In the short-run, when the market structure is fixed, the impact of personalized pricing hinges on the degree of market coverage (i.e., how many consumers buy). If coverage is high (e.g., because the production cost is low, or the number of firms is large), personalized pricing intensifies competition and so harms firms but benefits consumers, whereas the opposite is true if coverage is low. However in the long-run, when the market structure is endogenous, personalized pricing always benefits consumers because it induces the socially optimal level of firm entry. We also study the asymmetric case where some firms can use consumer data to price discriminate while others cannot, and show it can be worse for consumers than when either all or no firms can personalize prices.

JEL codes

  • D43: Oligopoly and Other Forms of Market Imperfection
  • D82: Asymmetric and Private Information • Mechanism Design
  • L13: Oligopoly and Other Imperfect Markets


Andrew Rhodes, and Jidong Zhou, Personalized Pricing and Competition, TSE Working Paper, n. 22-1333, May 2022.

See also

Published in

TSE Working Paper, n. 22-1333, May 2022