UCL School of Management

Research seminar

The Dynamic Effect of Price Discrimination in Business Markets


Hernan Bruno, INSEAD


Wednesday, 8 October 2014
15:00 – 16:30
Room 1.06, Roberts Building, Malet Place, London, WC1E 6BT

First-degree price discrimination is a prevalent practice in markets where transactions are private. Over time, customers may become aware where the prices they paid fall in the overall distribution of prices, which may affect their purchasing behaviour. Using a dynamic model, we show that the quantity purchased and the inter-purchased time change over time in response to price discrimination. By combining an autoregressive process with a change-point model, we disentangle pricing dynamics from non-price factors that occur passively as customers become more experienced with a product. We identify salesperson and product portfolio factors that affect customers’ reactions to price discrimination. Some salespeople can sell at higher prices without an effect on quantity purchased, or increased price sensitivity. We find evidence of a relationship between a salesperson charging more dispersed prices and a customer becoming more price sensitive over time. Product portfolio plays an important role: customers who purchase a broader product range show lower price sensitivity. Cross-product spill-over effects are significant: a high price paid for one product leads to lower quantity of purchase and longer inter-purchase time for other products. We discuss the implications of these findings for customer profitability, salesforce management and price rigidity.

Open to
PhD Programme
Last updated Friday, 10 October 2014