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Firms commonly price discriminate across consumers based on purchase history, a practice known as behavior-based price discrimination (BBPD). Existing studies usually assume that consumer preferences follow uniform distribution, and find that BBPD benefits consumers at the cost of firms, prisoners' dilemma. In this paper, we consider a class of consumer preferences distribution and show that new profit and welfare results arise. In particular, when consumer preferences are sufficiently clustered at the center of the market (e.g. triangular distribution), BBPD boosts industry profits at the expense of consumers. This is opposite to the standard prisoners' dilemma results under uniform distribution. On the other hand, when consumer preferences are not clustered at the center of the market, the usual findings prevail. Our results highlight the important role of the shape of preferences and provide useful implications for relevant players including managers, regulators and consumer advocates. * We thank Ramon Casadesus-Masanell (the editor), a co-editor and two anonymous referees whose comments and suggestions helped us improve this paper significantly. We are grateful to Luis Cabral for inspiring us to model a class of non-uniform distribution, and to participants at the China Meeting of the Econometric Society (Chengdu, 2016) and the International Workshop on Innovation and Industrial Economics (Nanjing University, China, 2016) for helpful comments and suggestions. This research has been financed by Portuguese public funds through FCT (Fundação para a Ciência e a Tecnologia) within the projects PTDC/IIM-ECO/2280/2014 and PTDC/EGE-ECO/28540/2017. Any errors are our own responsibility.

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Licensors of patents essential to a standard are often required to license on reasonable and non‐discriminatory (RAND) terms. Using a model with owners of essential patents and licensees who invest into standard‐conforming technologies, this paper demonstrates that the non‐discriminatory commitment alleviates the hold‐up problem. Moreover, it improves consumer and social welfare, and promotes upstream innovation as licensing revenue is increased. In an extended model with each licensor independently choosing whether to make the commitment, all licensors voluntarily commit in the unique equilibrium.

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