Customized Pricing: Win-Win or End Run?

Abstract

Modern technology, particularly as associated with internet shopping, permits excellent estimations of individual consumer willingness to pay. Customized pricing is defined as a pricing strategy based upon such individualized estimates--each customer is presented with an individual price. The paper addresses the ethical, legal, and managerial challenges of customized pricing practice. A simple empirical study is included to illustrate not only the economic effects of customized pricing but, also, the surprising finding of initial consumer satisfaction with customized prices. Participants showed considerably less satisfaction, however, upon learning the nature of the pricing technique.