published_or_final_version / Economics and Finance / Master / Master of Economics

In this paper, I empirically identify a new source of price discrimination utilized by airlines, namely, price discrimination based on the day of the week a ticket is purchased. Using unique transaction data, I compare tickets that are identical in every aspect except day of the week purchased (that is, traveling on the same date on the same route on the same airline with the same restrictions on flights with the same load factors and purchased the same number of days in advance), and find that airfares are cheapest when bought on the weekend. The size of this weekend purchase effect varies with distribution channel (online or offline) and how far in advance of departure the ticket is purchased. For transactions occurring more than two weeks before the departure date, offline weekend purchases are 3% cheaper than those made on weekdays, but online purchase prices do not differ significantly throughout the week. Conversely, in the final two weeks before departure, weekend purchases are 4% less expensive online but not significantly cheaper offline. These findings are consistent with price discrimination between high-elasticity leisure customers and low-elasticity business customers. If airlines believe that weekend purchasers are more likely to be price-elastic leisure travelers, then they may offer lower prices or make deals more transparent on the weekend. This conjecture is supported by the finding that the weekend purchase effect is generally larger on routes with a mixture of both business and leisure customers than on routes primarily traveled by leisure customers because price discrimination is both possible and effective on these heterogeneous routes.

Advances in information technologies have increasingly enabled firms to use consumers' past purchasing data to charge different prices to its own customers and to those customers that in some sense belong to the rival firm. At first glance this new form of price discrimination seems to be lucrative as it allows a firm to generate profitable incremental sales without damaging profits it can extract from its own customer base. However, as behaviour-based price discrimination gains popularity many interesting questions arise. Is it, really, in the best interest of firms to recognise customers with different past behaviour and to price discriminate accordingly? Or is it rather in their interest to avoid any possible learning and thereby price discrimination practices? Should consumers hide their true types, i.e., should they behave anonymously? Further, should government regulation restrict information collection and price discrimination practices? The study of these questions is the study of the profit and welfare effects of behaviourbased price discrimination. This is the central issue of this thesis. With that in mind, this thesis addresses three theoretical models. The first one is based on the hypothesis that the ability of firms to predict the preferences of individual customers for the purpose of price discrimination is less than perfect but is constantly improving due to advances in information technologies. Here the main goal will be to investigate how profits, consumer surplus and welfare evolve as price discrimination is based on more accurate information. The second model is a natural sequel of the former as it tries to model how firms might obtain a signal of a consumer's preferences. Whether or not a given consumer bought from the firm previously might be used as an accurate signal of a consumer's preferences. A key issue here will be to examine whether or not it is in the interest of firms to avoid learning and price discrimination and how can they attain that goal. Finally, the third model studies the interaction between purely informative advertising and price discrimination based on customers' past behaviour. As without advertising consumers are left out of the market, the welfare effects of price discrimination are guided by how will price discrimination affect each firm's advertising decisions in relation to the social optimal level of advertising.

Thesis (M. Econ.)--University of Hong Kong, 1996. / Includes bibliographical references (leaf 41).

Thesis (M.Econ.)--University of Hong Kong, 1996. / Includes bibliographical references (leaf 41). Also available in print.

Thesis (Ph. D.)--University of Wisconsin--Madison, 1981. / Typescript. Vita. Description based on print version record. Includes bibliographical references (leaves 348-356).

Thesis (Ph. D.)--University of Wisconsin--Madison, 1957. / Typescript. Abstracted in Dissertation abstracts, v. 19 (1958) no. 4, p. 696-697. Vita. eContent provider-neutral record in process. Description based on print version record. Includes bibliographical references (leaves 270-279).

Colombia's telecommunication industry has changed drastically in the last decade. Among the most salient events, a series of mergers between some of the industry's largest providers which resulted in a reduced number of competitors. One would expect that this reduction in the number of competitors would translate into higher prices. However, competition is at such high level that the media even talk about a "price war". My dissertation aims to shed light on the causes of this apparent inconsistency between a smaller number of competitors and more competitive outcomes. I start by showing that, in effect, the latest of these mergers, the one between Comcel and Telmex, had a pro-competitive effects on the provision of broadband. Next I show that the services provided by Comcel and Telmex were complements and that the pro-competitive effects of the merger can be explained by this complementarity. Finally, I study the effects of price discrimination under oligopolistic competition. In chapter 1 I assess the ex-post short-run effect on broadband provision of the Comcel-Telmex merger. Employing administrative data about the universe of plans and firms providing wired telecom services, I use several difference-in-difference specifications to obtain estimates for the effect of the merger on price and download speeds of plans provided by the merging firm and its rivals. My estimates suggest that, in markets affected by the merger, download speeds rose by .6 Megabits per second on average. The average increase in the markets resulted from increases in the plans offered by the merging firm (1.2 Mbps) and increases in the speeds of plans provided by its rivals (.5 Mbps). In chapter 2 I study mergers of firms producing complementary goods. Mergers of firms producing complementary products have ambiguous effects on consumer welfare. The merged firm may lower prices because the merger internalizes the profits originated by the complementarity. But with the merger the firm gains the ability to bundle and with bundles the firm can exert price discrimination, increasing the prices of standalone products. I employ a comprehensive, administrative data set, which records prices, market shares, and plan attributes of the universe of Colombia’s telecom carriers, to assess which effect dominates. I estimate a random-coefficient discrete choice model of consumer demand model for bundled and standalone telecom products, in which the degree of substitutability or complementarity among products is an essential parameter of interest. I find that major telecom products display a mix of substitutability and complementarity, but in general hardwired and mobile services are perceived as complements by Colombian households. My counterfactual experiments using the estimated model, indicate positive net effects of mergers with complements: despite a small increase in the price of standalone goods, consumer surplus increases by around 7 million dollars per quarter. Finally, in chapter 3, I study price discrimination in an oligopolistic setting. Economic theory is not conclusive about the effects of banning third degree price discrimination under imperfect competition. Price discrimination can enhance competition if the firms practicing don't agree on the ranking of their markets. In this case, price discrimination can lead to lower prices in all markets. Thus, forcing the firms to charge uniform prices can increase their profits and reduce consumers' surplus. Using data on prices, market shares and characteristics of telecommunication services sold under price discrimination by Colombian telecom providers, I estimate a model of competition. The estimates allow me to simulate a counterfactual scenario in which firms lose their ability to exert price discrimination within a city. Simulating a ban on price discrimination has negligible effect on consumer surplus and increases profits slightly.

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Price discrimination has been widely discussed in economics. Scholars have discussed perceived fairness in the direct exchange perspective, sellers and buyers. However, there are few studies related price discrimination and its impact on consumers¡¦ psychology. Therefore, this paper examines the influence of price discrimination on consumers¡¦ perceived unfairness and their purchase intention as well as the effect of discount depth and discount framing in consumer¡¦s perspective. Results obtained from 402 questionnaires collected in Taiwan indicate that (1) price discrimination has influence on consumers¡¦ perceived (un)fairness; (2) discount depths moderate the impact of price discrimination on consumers¡¦ perception of unfairness; (3) advantaged inequality has influence on consumers¡¦ purchase intention; (4) discount framing doesn¡¦t have influence on either consumers¡¦ perceived unfairness or their purchase intention.