Behaviour-based pricing with overlapping ownership

Abstract

Research has extensively explored why firms use their consumer information to price discriminate between repeat and new customers. This paper incorporates overlapping ownership and explores a more nuanced explanation for the practice. We isolate the different and interactive effects of overlapping ownership in different periods on equilibrium outcomes. In our explanation, firms use overlapping ownership to increase repeat purchase and customer retention and therefore may charge higher prices for both repeat and new customers, when they choose behaviour-based pricing rather than uniform pricing. As a result, if the degree of overlapping ownership is not too small, behaviour-based pricing benefits firms but hurts consumers.