Behavior-Based Price Discrimination and Customer Recognition

When firms are able to recognize their previous customers, they may be able to use their information about the consumers’ past purchases to offer different prices and/or products to consumers with different purchase histories. This article surveys the literature on this “behavior-based price discrimination.” *Forthcoming in the Handbook on Economics and Information Systems, Elsevier. We thank Mark Armstrong, Michael Baye, Assaf Ben-Shoham, Yongmin Chen, Terry Hendershott, John Morgan, Jae Nahm, Jean Tirole, and Juanjuan Zhang for insightful comments on an earlier draft of this paper, and for helpful conversations. NSF grant SES04-26199 provided financial support for some of this work.

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