SPEAKER：Dr. Peter Lijian Lu, HKUST

TIME/DATE：2026.7.1   10:00

CLASSROOM：A306

ABSTRACT

The growing use of personalized pricing powered by big data and artificial intelligence has generated significant concerns regarding fairness, transparency, and consumer welfare. While policymakers increasingly advocate regulatory interventions to limit discriminatory pricing, firms are simultaneously adopting corporate social responsibility (CSR) initiatives to address stakeholder concerns and improve trust. Despite their importance, little is known about the relative effectiveness of external regulation and internal governance in markets characterized by network effects, where consumers’ utilities depend on the participation of others.

We develop a game-theoretic framework that integrates personalized pricing, network externalities, and two distinct governance mechanisms: price fairness regulation imposed by a regulator and CSR commitments adopted voluntarily by firms. In our model, a monopolistic platform strategically prices heterogeneous consumers whose purchasing decisions generate network value for others. We characterize equilibrium outcomes under laissez-faire pricing, fairness regulation, and CSR-based pricing, and evaluate their impacts on demand, firm profit, consumer surplus, and social welfare.

Our analysis reveals that the effectiveness of governance mechanisms critically depends on the interaction between consumer heterogeneity and network effects. Fairness regulation can improve both firm profit and consumer surplus when valuation heterogeneity is sufficiently large, as pricing constraints enhance network participation and market efficiency. CSR commitments generate a distinct self-regulating mechanism that internalizes consumer welfare considerations, mitigates coordination failures arising from price opacity, and strengthens network formation. While both approaches can achieve Pareto improvements, they do so through fundamentally different channels: regulation constrains discriminatory pricing, whereas CSR aligns managerial incentives with stakeholder welfare. We further identify market conditions under which the two mechanisms act as substitutes or complements.

Our findings provide actionable guidance for managers designing ethical pricing strategies and for policymakers seeking to balance innovation, profitability, and consumer protection in increasingly data-driven digital markets.

GUEST BIO

Professor Lu is an Associate Professor at HKUST School of Business and Management. His primary research interests are in the area of data-driven decision-making with a focus on applications in e-commerce, pricing and revenue management, supply chain management, healthcare and service systems, finance-operations interface. His work has been recognized by world leading journals such as Management Science, Manufacturing & Service Operations Management, Mathematics of Operations Research, Production and Operations Management. He is recipient of Finalist of INFORMS George Nicholson Student Paper Competition and Second place of POMS College of Supply Chain Management Student Paper Competition .

Prior to joining HKUST Business School, Professor Lu took senior leadship in three sectors: finance, e-commerce, and online display advertising. Professor Lu was Founder and CIO at UniQuant Capital, where he lead quantitative research team and manage 3 billions quantitative long-short hedge funds; Executive Director at China Innovation Fund leading PE/VC investment in TMT area with 150 billions AUM; Vice President at Goldman Sachs Asset Management leading quantitative factor portfolio research and management with 15 billions USD AUM; Senior Research Scientist at Knight Capital Group on high frequency trading, at Amazon.com on e-commerce and logistic optimization, at AppNexus.com on online display advertising market.