When it’s too good to be true: Consumers’ reactions and firms’ responses to unintended price mistakes

Growing dynamic pricing and price automation trends increase the risk of price mistakes. In the case of low price mistakes, consumers might seek to take advantage of the error, and the company must decide whether to honor or deny the transactions. A set of studies reveal that consumers are more likely to take advantage of the price mistake when they feel powerful and when they perceive the company as powerful. Moreover, their perceptions of service fairness serve as double-edged swords, motivating consumers to take advantage of the price mistake because they anticipate a high likelihood that the company will honor the lower price but also inhibiting this behavior, due to consumers’ concern for the potential damage to the company. Finally, service fairness also influences how consumers react to firms’ decisions. This research offers an initial investigation of price mistakes that reveals valuable theoretical and managerial implications.