THE DEFENSE OF PRICE DISCRIMINATION IN NETWORK AND INFORMATION GOODS MARKETS

Simple item page
dc.contributor.authorSoukal, Ivan
dc.contributor.otherEkonomická fakultacs
dc.date.accessioned2021-12-09T09:34:57Z
dc.date.available2021-12-09T09:34:57Z
dc.description.abstractIt is not uncommon that articles focused on consumer-price interaction in the network and information goods market swiftly condemn price discrimination as an obfuscation, on-purpose price complexity, or market failure. The reason is a general neoclassical rule of an efficient market where prices are set at marginal cost with no price discrimination. However, the matter is more complicated. This review provides authors an overview of why, where, and which type of price discrimination should be viewed by different optics. Goods such as software, cell carrier services, electronic newspapers subscription, electric energy supply, payment accounts, books, copyrighted content streaming, etc, cannot be treated like manufactured goods. The reasons are specific conditions – substantial and/or repeated fixed/sunk cost, economies of scale, and demand heterogeneity. Recognized economist W. J. Baumol described marginal cost set prices under these conditions as an ‘economic suicide’. Reviewed articles showed that firms are forced to adopt price discrimination in order to recover their costs and to serve more consumer segments. Reviewed authors provided facts to support the use of multipart tariffs, dynamic pricing, versioning, bundling, and Ramsey pricing. These conclusions are used for suggestions on how several studies of information and network goods should be modified. Modifications are related mostly to model assumptions and pricing conclusions. I argue that, in the case of information and network goods, there is justified price discrimination. Hence, there is a certain justified level of price complexity that has to be accepted and not taken as automated evidence of inefficiency, market power, and consumer exploitation.en
dc.formattext
dc.identifier.doi10.15240/tul/001/2021-4-003
dc.identifier.eissn2336-5604
dc.identifier.issn1212-3609
dc.identifier.urihttps://dspace.tul.cz/handle/15240/161024
dc.language.isoen
dc.publisherTechnická Univerzita v Libercics
dc.publisherTechnical university of Liberec, Czech Republicen
dc.publisher.abbreviationTUL
dc.relation.isbasedonAbdallah, T. (2019). On the Benefit (Or Cost) of Large‐Scale Bundling. Production and Operations Management, 28(4), 955–969. https://doi.org/10.1111/poms.12958
dc.relation.isbasedonArmstrong, M. (2008). Price Discrimination. In P. Buccirossi (Ed.), Handbook of Antitrust Economics (pp. 433–467). Cambridge, MA: MIT Press.
dc.relation.isbasedonBang, S. H., & Kim, J. (2013). Price discrimination via information provision. Information Economics and Policy, 25(4), 215–224. https://doi.org/10.1016/j.infoecopol.2013.06.001
dc.relation.isbasedonBaumol, W. J. (2006). Regulation Misled by Misread Theory: Perfect Competition and Competition-Imposed Price Discrimination. Washington, DC: AEI-Brookings Joint Center for Regulatory Studies.
dc.relation.isbasedonBaumol, W. J., & Swanson, D. G. (2003). The new economy and ubiquitous competitive price discrimination: Identifying defensible criteria of market power. Antitrust Law Journal, 70(3), 661–685.
dc.relation.isbasedonBhargava, H. K., & Choudhary, V. (2001). Second-degree price discrimination for information goods under nonlinear utility functions. In Proceedings of the 34th Annual Hawaii International Conference on System Sciences (p. 6). Maui, HI, USA. https://doi.org/10.1109/HICSS.2001.927070
dc.relation.isbasedonCarlin, B. I. (2009). Strategic price complexity in retail financial markets. Journal of Financial Economics, 91(3), 278–287. https://doi.org/10.1016/j.jfineco.2008.05.002
dc.relation.isbasedonChao, Y., Fernandez, J., & Nahata, B. (2015). Pay-what-you-want pricing: Can it be profitable? Journal of Behavioral and Experimental Economics, 57, 176–185. https://doi.org/10.1016/j.socec.2014.09.004
dc.relation.isbasedonChellappa, R. K., & Mehra, A. (2018). Cost Drivers of Versioning: Pricing and Product Line Strategies for Information Goods. Management Science, 64(5), 2164–2180. https://doi.org/10.1287/mnsc.2016.2698
dc.relation.isbasedonChioveanu, I., & Zhou, J. (2013). Price Competition with Consumer Confusion. Management Science, 59(11), 2450–2469. https://doi.org/10.1287/mnsc.2013.1716
dc.relation.isbasedonCoase, R. H. (1946). The Marginal Cost Controversy. Economica, 13(51), 169. https://doi.org/10.2307/2549764
dc.relation.isbasedonCox, J. (2017). Play It Again, Sam? Versioning in the Market for Second-hand Video Game Software. Managerial and Decision Economics, 38(4), 526–533. https://doi.org/10.1002/mde.2800
dc.relation.isbasedonDuffy, J. F. (2004). The Marginal Cost Controversy in Intellectual Property. University of Chicago Law Review, 71(1), 37–56. Retrieved from https://chicagounbound.uchicago.edu/uclrev/vol71/iss1/4
dc.relation.isbasedonEllison, G., & Wolitzky, A. (2012). A search cost model of obfuscation. The RAND Journal of Economics, 43(3), 417–441. https://doi.org/10.1111/j.1756-2171.2012.00180.x
dc.relation.isbasedonElmaghraby, W., & Keskinocak, P. (2003). Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions. Management Science, 49(10), 1287–1309. https://doi.org/10.1287/mnsc.49.10.1287.17315
dc.relation.isbasedonEvsukov, S. G., Sigarev, A. V., Ustyuzhanina, E. V., & Zaytseva, E. V. (2016). Comparative analysis of pricing policies in the market for network goods. Journal of Internet Banking and Commerce, 21(S6).
dc.relation.isbasedonFrey, B. S., & Pommerehne, W. W. (1993). On the fairness of pricing – An empirical survey among the general population. Journal of Economic Behavior & Organization, 20(3), 295–307. https://doi.org/10.1016/0167-2681(93)90027-M
dc.relation.isbasedonFriesen, L., & Earl, P. E. (2015). Multipart tariffs and bounded rationality: An experimental analysis of mobile phone plan choices. Journal of Economic Behavior & Organization, 116, 239–253. https://doi.org/10.1016/j.jebo.2015.04.016
dc.relation.isbasedonGrubb, M. D. (2015). Failing to Choose the Best Price: Theory, Evidence, and Policy. Review of Industrial Organization, 47(3), 303–340. https://doi.org/10.1007/s11151-015-9476-x
dc.relation.isbasedonGrubb, M. D., & Osborne, M. (2015). Cellular Service Demand: Biased Beliefs, Learning, and Bill Shock. American Economic Review, 105(1), 234–271. https://doi.org/10.1257/aer.20120283
dc.relation.isbasedonGu, Y., & Wenzel, T. (2014). Strategic Obfuscation and Consumer Protection Policy: Strategic Obfuscation and Consumer Protection Policy. The Journal of Industrial Economics, 62(4), 632–660. https://doi.org/10.1111/joie.12060
dc.relation.isbasedonGu, Y., & Wenzel, T. (2017). Consumer confusion, obfuscation and price regulation. Scottish Journal of Political Economy, 64(2), 169–190. https://doi.org/10.1111/sjpe.12121
dc.relation.isbasedonHomburg, C., Totzek, D., & Krämer, M. (2014). How price complexity takes its toll: The neglected role of a simplicity bias and fairness in price evaluations. Journal of Business Research, 67(6), 1114–1122. https://doi.org/10.1016/j.jbusres.2013.05.049
dc.relation.isbasedonHotelling, H. (1938). The General Welfare in Relation to Problems of Taxation and of Railway and Utility Rates. Econometrica, 6(3), 242–269. https://doi.org/10.1007/978-1-4613-8905-7_10
dc.relation.isbasedonHuang, K.-W., & Sundararajan, A. (2011). Pricing Digital Goods: Discontinuous Costs and Shared Infrastructure. Information Systems Research, 22(4), 721–738. https://doi.org/10.1287/isre.1100.0283
dc.relation.isbasedonKalaycı, K. (2015). Price complexity and buyer confusion in markets. Journal of Economic Behavior & Organization, 111, 154–168. https://doi.org/10.1016/j.jebo.2015.01.001
dc.relation.isbasedonKalaycı, K., & Potters, J. (2011). Buyer confusion and market prices. International Journal of Industrial Organization, 29(1), 14–22. https://doi.org/10.1016/j.ijindorg.2010.06.004
dc.relation.isbasedonKalaycı, K., & Serra-Garcia, M. (2016). Complexity and biases. Experimental Economics, 19(1), 31–50. https://doi.org/10.1007/s10683-015-9434-3
dc.relation.isbasedonKopczewski, T., Sobolewski, M., & Miernik, I. (2018). Bundling or unbundling? Integrated simulation model of optimal pricing strategies. International Journal of Production Economics, 204, 328–345. https://doi.org/10.1016/j.ijpe.2018.08.017
dc.relation.isbasedonLevine, M. E. (2002). Price Discrimination Without Market Power. Yale Journal on Regulation, 19(1), 2–35.
dc.relation.isbasedonLi, H., & Dinlersoz, E. (2012). Quality-based Price Discrimination: Evidence from Internet Retailers’ Shipping Options. Journal of Retailing, 88(2), 276–290. https://doi.org/10.1016/j.jretai.2011.12.002
dc.relation.isbasedonLiberati, A., Altman, D. G., Tetzlaff, J., Mulrow, C., Gøtzsche, P. C., Ioannidis, J. P. A., Clarke, M., Devereaux, P. J., Kleijnen, J., & Moher, D. (2009). The PRISMA Statement for Reporting Systematic Reviews and Meta-Analyses of Studies That Evaluate Health Care Interventions: Explanation and Elaboration. PLoS Medicine, 6(7), e1000100. https://doi.org/10.1371/journal.pmed.1000100
dc.relation.isbasedonLunn, P. D. (2013). Telecommunications Consumers: A Behavioral Economic Analysis: Telecommunications Consumers. Journal of Consumer Affairs, 47(1), 167–189. https://doi.org/10.1111/j.1745-6606.2012.01245.x
dc.relation.isbasedonMunoz-Alvarez, D., Garcia-Franco, J. F., & Tong, L. (2018). On the Efficiency of Connection Charges – Part II: Integration of Distributed Energy Resources. IEEE Transactions on Power Systems, 33(4), 3834–3844. https://doi.org/10.1109/TPWRS.2017.2782791
dc.relation.isbasedonMunoz-Alvarez, D., & Tong, L. (2018). On the Efficiency of Connection Charges – Part I: A Stochastic Framework. IEEE Transactions on Power Systems, 33(4), 3822–3833. https://doi.org/10.1109/TPWRS.2017.2782802
dc.relation.isbasedonNelson, T., McCracken-Hewson, E., Whish-Wilson, P., & Bashir, S. (2018). Price dispersion in Australian retail electricity markets. Energy Economics, 70, 158–169. https://doi.org/10.1016/j.eneco.2017.12.026
dc.relation.isbasedonNeuteleers, S., Mulder, M., & Hindriks, F. (2017). Assessing fairness of dynamic grid tariffs. Energy Policy, 108, 111–120. https://doi.org/10.1016/j.enpol.2017.05.028
dc.relation.isbasedonPhillips, R. L. (2005). Pricing and Revenue Optimization. Redwood City, CA: Stanford Business Books.
dc.relation.isbasedonPodesta, M., & Poudou, J.-C. (2012). Bundling Commodities and Attached Services with Nonlinear Pricing. Recherches économiques de Louvain, 78(2), 25–52. https://doi.org/10.3917/rel.782.0025
dc.relation.isbasedonRaineri, R., & Giaconi, P. (2005). Price and access charge discrimination in electricity distribution: An application to the Chilean case. Energy Economics, 27(5), 771–790. https://doi.org/10.1016/j.eneco.2005.04.001
dc.relation.isbasedonRamsey, F. P. (1927). A Contribution to the Theory of Taxation. The Economic Journal, 37(145), 47–61. https://doi.org/10.2307/2222721
dc.relation.isbasedonRoach, T. (2019). Market power and second degree price discrimination in retail gasoline markets. Energy Economics, 84, 104514. https://doi.org/10.1016/j.eneco.2019.104514
dc.relation.isbasedonRobinson, J. (1933). The Economics of Imperfect Competition. London: Palgrave Macmillan UK. https://doi.org/10.1007/978-1-349-15320-6
dc.relation.isbasedonSchiff, A. (2008). The “Waterbed” Effect and Price Regulation. Review of Network Economics, 7(3), 392–414. https://doi.org/10.2202/1446-9022.1155
dc.relation.isbasedonSchleich, J., Faure, C., & Gassmann, X. (2019). Household internal and external electricity contract switching in EU countries. Applied Economics, 51(1), 103–116. https://doi.org/10.1080/00036846.2018.1494379
dc.relation.isbasedonSchuler, R. E. (2012). Pricing the use of capital-intensive infrastructure over time and efficient capacity expansion: Illustrations for electric transmission investment. Journal of Regulatory Economics, 41(1), 80–99. https://doi.org/10.1007/s11149-011-9176-x
dc.relation.isbasedonSchwind, M., & Wendt, O. (2002). Dynamic Pricing of Information Products Based on Reinforcement Learning: A Yield-Management Approach. In M. Jarke, G. Lakemeyer, & J. Koehler (Eds.), KI 2002: Advances in Artificial Intelligence (Vol. 2479, pp. 51–66). Berlin, Heidelberg: Springer. https://doi.org/10.1007/3-540-45751-8_4
dc.relation.isbasedonShang, W., Wu, H., & Ji, Z. (2007). Applying CRM in information product pricing. In S. Chaudhry, L. Xu, & A. Tjoa (Eds.), Research and Practical Issues of Enterprise Information Systems II (Vol. 255, pp. 1407–1411). Berlin, Heidelberg: Springer.
dc.relation.isbasedonShapiro, C., & Varian, H. R. (2008). Information Rules: A Strategic Guide to the Network Economy. Brighton, MA: Harvard Business School Press.
dc.relation.isbasedonSimshauser, P., & Whish-Wilson, P. (2017). Price discrimination in Australia’s retail electricity markets: An analysis of Victoria & Southeast Queensland. Energy Economics, 62, 92–103. https://doi.org/10.1016/j.eneco.2016.12.016
dc.relation.isbasedonSpiegler, R. (2016). Choice Complexity and Market Competition. Annual Review of Economics, 8(1), 1–25. https://doi.org/10.1146/annurev-economics-070615-115216
dc.relation.isbasedonStahl, F., & Siegel, F. (2005). Non-linear Pricing of Paid Content Products. In Proceedings of the 18th Bled EConference EIntegration in Action. Bled, Slovenia.
dc.relation.isbasedonStigler, G. J. (1963). United States v. Loew’s Inc.: A Note on Block-Booking. The Supreme Court Review, 1963, 152–157. https://doi.org/10.1086/scr.1963.3108731
dc.relation.isbasedonStigler, G. J. (1987). The Theory of Price (4th ed). New York, NY: Collier Macmillan.
dc.relation.isbasedonStole, L. A. (2007). Price Discrimination and Competition. In M. Armstrong, & R. Porter (Eds.), Handbook of Industrial Organization (1st ed., Vol. 3, pp. 2221–2299). Amsterdam: Elsevier.
dc.relation.isbasedonTóbiás, Á. (2018). Non-linear pricing and optimal shipping policies. Games and Economic Behavior, 112, 194–218. https://doi.org/10.1016/j.geb.2018.08.008
dc.relation.isbasedonvan Boom, W. H. (2011). Price Intransparency, Consumer Decision Making and European Consumer Law. Journal of Consumer Policy, 34(3), 359–376. https://doi.org/10.1007/s10603-011-9163-8
dc.relation.isbasedonVarian, H. R. (1989). Price Discrimination. In Handbook of Industrial Organization (Vol. 1). Amsterdam: North Holland.
dc.relation.isbasedonVarian, H. R. (1996). Differential Pricing and Efficiency. First Monday, 1(2), 1–13. https://doi.org/10.5210/fm.v1i2.473
dc.relation.isbasedonVickers, J. (1997). Regulation, competition, and the structure of prices. Oxford Review of Economic Policy, 13(1), 15–26. https://doi.org/10.1093/oxrep/13.1.15
dc.relation.ispartofEkonomie a Managementcs
dc.relation.ispartofEconomics and Managementen
dc.relation.isrefereedtrue
dc.rightsCC BY-NC
dc.subjectprice discriminationen
dc.subjectmarginal costen
dc.subjectprice complexityen
dc.subjectprice obfuscationen
dc.subjectnetwork goodsen
dc.subjectinformation goodsen
dc.subject.classificationL11
dc.subject.classificationD24
dc.titleTHE DEFENSE OF PRICE DISCRIMINATION IN NETWORK AND INFORMATION GOODS MARKETSen
dc.typeArticleen
local.accessopen
local.citation.epage55
local.citation.spage39
local.facultyFaculty of Economics
local.fulltextyes
local.relation.abbreviationE+Mcs
local.relation.abbreviationE&Men
local.relation.issue4
local.relation.volume24
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
EM_4_2021_03.pdf
Size:
555.64 KB
Format:
Adobe Portable Document Format
Description:
článek
Download
Collections
Číslo 4