Price lower and then higher or price higher and then lower?
AbstractThe paper presents an experiment testing the hypothesis that, if consumers’ valuation of a product is shaped by past experiences of prices, it may be more profitable for firms to follow the opposite strategy of pricing higher and then lower. We ran an individual choice experiment with a posted offer market setup, where different dynamic pricing strategies were implemented. Anchoring to the past two prices under simple rules can describe the behavior of 3 out of 4 subjects. We find evidence of preference shaping and the profitability of a ‘high low’ pricing strategy under a wide range of assumptions.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Psychology.
Volume (Year): 33 (2012)
Issue (Month): 6 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/joep
Consumer market; Dynamic price strategies; Shaping effects; Anchoring; Within-context rules; 2340; 2343; 2360; 3920; 3940;
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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