Price Skimming Paradoxes

Gary Gebhardt, University of South Florida

Price Skimming Paradoxes

Gary F. Gebhardt

University of South Florida

 

Managers in new and growing markets often use price skimming to maximize firm profits. Relying on conceptions of distributive and procedural justice, I suggest price skimming can create consumer perceptions of unfairness, negatively affecting satisfaction and behavioral intentions. Existing customer pricing policies may moderate these effects, depending on whether policies are distributively and/or procedurally just. Four experimental studies support these assertions. This research reveals a managerial paradox: price skimming, thought to maximize firm profits, may be a suboptimal strategy in some markets. Instead, most-favored customer pricing policies are jointly optimal for consumers and firms, revealing a consumer welfare paradox.
[ to cite ]:
Gary Gebhardt (2006) ,"Price Skimming Paradoxes", in NA - Advances in Consumer Research Volume 33, eds. Connie Pechmann and Linda Price, Duluth, MN : Association for Consumer Research, Pages: 242-243.