Customer Responses to Dynamic Pricing: Effects of Price Difference and Price Favorability

This study investigates customer reactions to dynamic pricing (i.e., charging different prices for the same goods in different markets) and finds that customers show asymmetrical responses to an increase in price difference. Specifically, customers who pay a higher price show stronger intentions to switch stores, to complain, and to spread negative word-of-mouth when price difference gets larger, while an increase in price difference shows no effect on those who pay a lower price. In addition, negative emotions experienced by customers mediate the relationship between unfairness perception and behavioural responses. Results suggest that managers should exercise extra caution when introducing a relatively large price difference, and they should try to manage customers’ in-store emotional state to reduce the negative effects of dynamic pricing.

Citation:

Lingjing Zhan and Alison Lloyd (2011) ,"Customer Responses to Dynamic Pricing: Effects of Price Difference and Price Favorability", in AP - Asia-Pacific Advances in Consumer Research Volume 9, eds. Zhihong Yi, Jing Jian Xiao, and June Cotte and Linda Price, Duluth, MN : Association for Consumer Research, Pages: 129-131.