Personalization, Customer Data Aggregation, and The Role of List Price

When consumers' inferences of their reservation values are subject to environmental noise, firms can obtain superior knowledge over consumers through customer data aggregation. Although the superior knowledge facilitates personalized pricing, it may also induce consumer suspicions of overpaying. Consequently, the standard personalized pricing strategy may fail the intuitive criterion. Instead, a separating strategy with a binding list price can alleviate consumer suspicions and convince consumers of their value. Because the firm cannot abuse its superior knowledge by either steering consumers to overestimate or appropriating the entire economic surpluses, personalized pricing with a list price can strictly benefit some consumers relative to uniform pricing