Understanding the Effects of Price Discrimination on Digital Market Competition

Abstract

Purpose: This study examines the impact of price discrimination on digital market competition in Nepal’s rapidly expanding e‑commerce sector, focusing on effects on platform revenue, market competition, and consumer welfare.

Design/Methodology/Approach: A quantitative analysis using secondary data of 50 price observations from Nepal’s three leading e‑commerce platforms (Daraz, Sastodeal, Gyapu), supplemented by published reports and academic literature. Descriptive statistics and Pearson correlation analysis assess relationships among personalized pricing, revenue performance, market competition, and consumer welfare.

Findings: Price variations across platforms range from approximately 5% to 11%, indicating growing use of algorithm-driven personalized pricing. A strong positive correlation (r = 0.69) links price discrimination to platform revenue growth, while a moderate negative correlation (r = –0.58) associates price discrimination with reduced market competitiveness, suggesting larger platforms gain advantage over smaller rivals. Excessive price variation appears to undermine consumer trust by fostering perceptions of unfairness.

Originality/Value: This study is among the first empirical assessments of price discrimination in Nepal’s e-commerce market. It shows that personalized pricing can improve platform performance but may harm competition and consumer welfare, highlighting the need for greater pricing transparency, consumer protection, and regulatory oversight.