Online Infomediaries and Price Discrimination: Evidence from the Automotive Retailing Sector

Abstract

This article focuses on a novel mechanism for market segmentation and price discrimination based on consumers' use of online infomediaries. Using the automotive retailing context as the setting for the study, the authors address the following question: Can online infomediaries serve as a viable mechanism for market segmentation and price discrimination? They draw on a unique and extensive data set of consumers who report on the information they found when using online buying services (OBS) as part of their new vehicle purchase process. The analysis of the data set shows that consumers who obtain price information pay lower prices (for the same product), whereas consumers who obtain product information pay higher prices. Although this points to the existence of distinct consumer segments, this knowledge is of limited value without a viable mechanism that enables firms to identify and target these customer segments specifically. On the basis of consumer usage patterns of OBS, the authors uncover distinct OBS clusters and empirically demonstrate that the use of these different clusters is associated with predicted differences in consumer outcomes. They also show that the differential use of OBS clusters is systematically related to underlying consumer characteristics. They discuss the relevance of the findings for automobile dealers and manufacturers and for other industries in which online infomediaries have established a significant presence.