Recommendations and Cross-selling: Pricing Strategies when Personalizing Firms Cross-sell

Abhijeet Ghoshal, Vijay S. Mookerjee, Sumit Sarkar

Research output: Contribution to journalArticlepeer-review

Abstract

Recommender systems enable firms to target customers with products and services that better match their needs, as well as cross-sell products and services. Considering these factors in markets with monopoly and duopoly, we investigate (i) How do pricing strategies differ when firms cross-sell versus when they do not cross-sell, and (ii) How do these pricing strategies change when a firm improves its recommender system? We find that cross-selling can enable a monopolist to subsidize its price for the focal products, while maximizing its profit. In a duopoly, the price set by the firm with the inferior system (low-type firm) is always lower when the firms cross-sell than when the firms do not cross-sell; however, that does not necessarily hold for the high-type firm. When the high-type firm improves its recommender system, the low-type firm may decrease its price when firms cross-sell, which does not happen when firms do not cross-sell.

Original languageEnglish (US)
Pages (from-to)430-456
Number of pages27
JournalJournal of Management Information Systems
Volume38
Issue number2
DOIs
StatePublished - 2021
Externally publishedYes

Keywords

  • duopoly
  • game theory
  • online cross-selling
  • online pricing
  • online targeting
  • personalization
  • Recommender systems

ASJC Scopus subject areas

  • Management Information Systems
  • Computer Science Applications
  • Management Science and Operations Research
  • Information Systems and Management

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