The rapid growth of information technology enables firms to track consumer purchase histories. This allows them to distinguish between new and returning customers, and to adjust both prices and delivery promises accordingly. A recent study develops a two-period duopoly game-theoretic model to examine how these strategies (behavior-based pricing (BBP) and behavior-based promised delivery times (BBT)) affect firms, consumers, and society.

Key Insights Dual discrimination strategies

Firms are incentivized to treat new and old consumers differently. New customers receive lower prices but longer delivery times, while loyal customers face higher prices but shorter delivery times. In other words, firms "reward" newcomers on price but "reward" loyal customers with speed.Profit vs. consumer surplus trade-off

Consistent with prior BBP research, differentiation reduces firm profits but boosts consumer surplus. When firms also differentiate on delivery times, this effect is amplified: profits decline further, while consumers gain even more.Impacts on social welfare

Whether BBP and BBT enhance social welfare depends on consumer time-sensitivity. If consumers value speed highly, these strategies can raise overall welfare. Otherwise, they risk harming it.Mitigating price competition

While BBP intensifies price competition, adding BBT has a dampening effect. By using delivery times as a second lever, firms can sustain higher prices without collapsing into destructive price wars, though at the cost of widening consumer discrimination. Managerial and Policy Implications For firms, uniform pricing may be more profitable, but targeted BBP/BBT strategies can secure competitive advantages in terms of consumer surplus and loyalty, provided firms manage perceptions of fairness carefully.For policymakers: Since BBP/BBT can both enhance and harm welfare, regulation may be needed, primarily to address concerns of fairness and transparency in e-commerce. Limitations and Future Research

The model assumes rational consumers and ignores capacity bottlenecks (e.g., warehouse overloads), which in reality affect delivery reliability. Future work should integrate inventory constraints, partial market coverage, and fairness perceptions -- particularly the risk of consumer backlash if discriminatory delivery promises become visible. Empirical testing via e-commerce A/B experiments could provide valuable evidence.

Conclusion

This research highlights that price and delivery time are deeply interconnected in shaping consumer welfare and firm strategy. While firms may sacrifice short-term profits, behavior-based strategies can reshape competition and, under certain conditions, increase social welfare. The challenge lies in striking a balance between profitability, consumer expectations, and fairness.

Source: Jiang, T., Shen, K., Fu, W., Liu, W., & Wang, S. (2025). Faster Delivery? You May Be Paying a Higher Price than Others! Journal of Theoretical and Applied Electronic Commerce Research, 20(3), 227. https://doi.org/10.3390/jtaer20030227