Digital Transformation and New Forms of Price Differentiation – What about Social Acceptance?


This challenge was introduced by Rebekka Rehm and Clemens Recker, researchers at iwp Institute for Economic Policy at the University of Cologne.


One aspect of digital transformation is the increasing availability of data on consumer preferences and characteristics. This data also allows conclusions to be drawn about the individual willingness to pay for products or services. Where companies have pricing power, they could use this information for individually different prices for comparable products or services.


In simplified terms, a company would gain a producer’s surplus if it could produce a product at costs below the selling price. Consumers, on the other hand, would gain a consumer’s surplus if they had been willing to pay more than the selling price. In a scenario with differentiated prices based on the individual willingness to pay, companies could transform former consumer’s surplus into producer’s surplus.


One exciting question is how consumers could react to such a profit shift. If the feeling would arise that the company side would always benefit disproportionately from market transactions, this might reduce the acceptance of our economic order.

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    The Institute for Economic Policy was founded in 1950 as an independent, economic research institute at the University of Cologne. Its founders were Prof. Dr. Alfred Müller-Armack, who had developed the concept of a social market economy (“Soziale Marktwirtschaft” in German), and Dr. h.c. Franz Greiß.

    The primary objective of the Institute is the research of current key issues of economic policy. The focus lies on problems of economic policy rules (including the concept of “Ordnungspolitik”) and a regulative framework necessary to uphold the social market economy.

    The iwp is partner of the YES!-Young Economic Summit in 2018.