Hiding or disclosing? Information discrimination in member-only discounts

Abstract

E-commerce platforms commonly offer price discounts as a loyalty benefit for fee-based members. Some of them disclose the member-only discount, while others strategically hide the specific discount information from non-members, which can be seen as information discrimination between non-members and members. This paper constructs a stylized model to examine whether disclosing or hiding member-only discounts yields higher revenue. Our study also incorporates the two-sided reference price effects into customers’ utility formation to reveal how information discrimination works. By comparing the revenue gap between information disclosing and hiding strategies concerning exogenous and endogenous member-only discounts, we find that platforms that aim at the high-end market by charging a higher product price and membership fee and whose target customers hold higher negative but lower positive reference price effect should implement the information hiding strategy. The findings guide e-commerce platforms to improve revenue by strategically hiding or disclosing member-only discounts in fee-based membership management.