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Price variation antagonism and firm pricing policies

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Author Info

  • Courty, Pascal
  • Pagliero, Mario

Abstract

Survey evidence suggests firms do not use pricing policies that vary prices in response to demand changes because they fear that such practices would antagonize consumers. We investigate this hypothesis using a dataset from a firm that has experimented with different pricing schemes. Each scheme is characterized by how much prices respond to demand variations. We find evidence that is consistent with the hypothesis that consumers take advantage of the opportunities offered by price changes and inconsistent with the hypothesis that consumers are antagonized by price changes caused by demand shocks.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 75 (2010)
Issue (Month): 2 (August)
Pages: 235-249

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Handle: RePEc:eee:jeborg:v:75:y:2010:i:2:p:235-249

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Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: Consumer demand Consumer antagonism Price variation Responsive pricing Fairness;

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References

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  1. Courty, Pascal & Pagliero, Mario, 2003. "Responsive Pricing," CEPR Discussion Papers 4036, C.E.P.R. Discussion Papers.
  2. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-58, September.
  3. Paul Heidhues & Botond Köszegi, 2004. "The Impact of Consumer Loss Aversion on Pricing," CIG Working Papers SP II 2004-17, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  4. Mark Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," Macroeconomics 0402020, EconWPA.
  5. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  6. Pascal Courty & Mario Pagliero, 2008. "Do Consumers Care about How Prices Are Set?," Economics Working Papers ECO2008/03, European University Institute.
  7. Courty, Pascal & Pagliero, Mario, 2003. "Does Responsive Pricing Increase Efficiency? Evidence from Pricing Experiments in an Internet Café," CEPR Discussion Papers 4149, C.E.P.R. Discussion Papers.
  8. Alvin E. Roth, 2006. "Repugnance as a Constraint on Markets," Levine's Bibliography 321307000000000629, UCLA Department of Economics.
  9. Frey, Bruno S. & Pommerehne, Werner W., 1993. "On the fairness of pricing -- An empirical survey among the general population," Journal of Economic Behavior & Organization, Elsevier, vol. 20(3), pages 295-307, April.
  10. Drew Fudenberg, 2006. "Advancing Beyond Advances in Behavioral Economics," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 694-711, September.
  11. Julio J. Rotemberg, 2011. "Fair Pricing," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 952-981, October.
  12. Sam Peltzman, 1998. "Prices Rise Faster Than They Fall," University of Chicago - George G. Stigler Center for Study of Economy and State 142, Chicago - Center for Study of Economy and State.
  13. Kelly L. Haws & William O. Bearden, 2006. "Dynamic Pricing and Consumer Fairness Perceptions," Journal of Consumer Research, University of Chicago Press, vol. 33(3), pages 304-311, October.
  14. Fudenberg, Drew, 2006. "Advancing Beyond "Advances in Behavioral Economics"," Scholarly Articles 3208222, Harvard University Department of Economics.
  15. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
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Citations

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Cited by:
  1. Spiegler, Ran, 2010. "Monopoly Pricing when Consumers are Antagonized by Unexpected Price Increases: A "Cover Version" of the Heidhues-Koszegi-Rabin Model," MPRA Paper 21429, University Library of Munich, Germany.
  2. Pascal Courty & Mario Pagliero, 2008. "Does Responsive Pricing Smooth Demand Shocks?," Economics Working Papers ECO2008/01, European University Institute.

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