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Price variation antagonism and firm pricing policies

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  • Courty, Pascal
  • Pagliero, Mario

Abstract

Pricing schemes that vary prices in response to demand shocks may antagonize consumers and reduce demand. At the same time, consumers may take advantage of the opportunities offered by price changes. Overall, the net impact of varying price on demand is ambiguous. We investigate this issue empirically, exploiting a unique dataset from a firm that has experimented with different pricing schemes. Each scheme is characterized by how much prices respond to fluctuations in demand and generates different amounts of price variability. We find that greater variability in prices does not lead to diminished demand. We discuss the implications of our findings in terms of the consumer antagonism hypothesis.
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Suggested Citation

  • Courty, Pascal & Pagliero, Mario, 2010. "Price variation antagonism and firm pricing policies," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 235-249, August.
  • Handle: RePEc:eee:jeborg:v:75:y:2010:i:2:p:235-249
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    1. 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).
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    Citations

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    Cited by:

    1. Pascal Courty & Mario Pagliero, 2011. "Does responsive pricing smooth demand shocks?," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4707-4721.
    2. Hendrik Sonnabend, 2016. "Fairness constraints on profit-seeking: evidence from the German club concert industry," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, pages 529-545.
    3. Richards, Timothy J. & Liaukonyte, Jura & Streletskaya, Nadia A., 2016. "Personalized pricing and price fairness," International Journal of Industrial Organization, Elsevier, pages 138-153.
    4. Ran Spiegler, 2012. "Monopoly pricing when consumers are antagonized by unexpected price increases: a “cover version” of the Heidhues–Kőszegi–Rabin model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 695-711.
    5. Andreas Leibbrandt, 2016. "Behavioral Constraints on Pricing: Experimental Evidence on Price Discrimination and Customer Antagonism," CESifo Working Paper Series 6214, CESifo Group Munich.
    6. Ran Spiegler, 2012. "Monopoly pricing when consumers are antagonized by unexpected price increases: a “cover version” of the Heidhues–Kőszegi–Rabin model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 695-711.
    7. Richards, Timothy & Liaukonyte, Jura & Nadia, Streletskya, 2016. "Personalized Pricing and Price Fairness," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235809, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Consumer demand Consumer antagonism Price variation Responsive pricing Fairness;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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