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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Paper provided by European University Institute in its series Economics Working Papers with number
ECO2006/27.
Length: Date of creation: 2006 Date of revision: Handle: RePEc:eui:euiwps:eco2006/27
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Carlton, Dennis W, 1986.
"The Rigidity of Prices,"
American Economic Review,
American Economic Association, vol. 76(4), pages 637-58, September.
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