Competitive Mobile Geo Targeting

We investigate in a competitive setting the consequences of mobile geo targeting, the practice of firms targeting consumers based on their real-time locations. A distinct market feature of mobile geo targeting is that a consumer could travel across different locations for an offer that maximizes his total utility. This mobile-deal seeking opportunity motivates firms to carefully balance prices across locations to avoid intrafirm cannibalization, which in turn mitigates interfirm price competition and prevents firms from going into a prisoner’s dilemma. As a result, a firm’s profit can be higher under mobile geo targeting than under uniform or traditional targeted pricing. We extend our model in three different directions: (a) a fraction of consumers are not aware of mobile offers outside of their permanent locations, (b) mobile offers can be collected when consumers travel for other reasons, and (c) firms use both permanent and real-time locations when setting prices. Our findings have important manageria...