Shipping to Customers With Asymmetric Carriers Under Personalized Pricing

With the development of Big Data technology, firms are able to collect data on consumer preferences and use it to personalize pricing. Personalized pricing, a tool that is heavily used in practice, is studied in the existing literature mainly in the context of symmetric information that takes into account consumer preferences. However, the personalized pricing under both complete and incomplete information when considering consumers' sensitivity to time slack (STTS) that affects consumer preferences is rarely examined. We develop a two-period game model of two carriers with asymmetric STTS information to capture carriers' freight rate decisions (personalized and nonpersonalized price) and effects of STTS information transparency. We find that when an information-advantaged (IA) carrier is initially more competitive in the market, where it can poach consumers from an information-disadvantaged (ID) carrier in the second period but not vice versa, STTS information transparency and leadership transition (i.e., the process in which the ID carrier changes from an initial market follower to a market leader) do not affect the IA carrier's personalized pricing but reduce that of the ID carrier. In equilibrium, when consumers' STTS is of the high type, information transparency increases the IA carrier's profit but may reduce the ID carrier's profit. We also find that when consumers' STTS is low, leadership transition increases the IA carrier's profit and decreases the ID carrier's profit. Our research provides guidance on carriers' personalized pricing and whether the ID carrier should strive to become the market leader. At the same time, our study provides a basis for carriers to determine the impact of information transparency in the shipping industry.