IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-00840230.html
   My bibliography  Save this paper

Price Variation Antagonism and Firm Pricing Policies

Author

Listed:
  • Pascal Courty

    (Department of Economics - EUI - European University Institute)

  • Mario Pagliero

    (UNITO - Università degli studi di Torino = University of Turin)

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.

Suggested Citation

  • Pascal Courty & Mario Pagliero, 2010. "Price Variation Antagonism and Firm Pricing Policies," Post-Print hal-00840230, HAL.
    • Handle: RePEc:hal:journl:hal-00840230
    DOI: 10.1016/j.jebo.2010.05.006
    Note: View the original document on HAL open archive server: https://hal.science/hal-00840230
    as

    Download full text from publisher

    File URL: https://hal.science/hal-00840230/document
    Download Restriction: no
    File URL: https://libkey.io/10.1016/j.jebo.2010.05.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Julio J. Rotemberg, 2011. "Fair Pricing," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 952-981, October.
    2. Drew Fudenberg, 2006. "Advancing Beyond Advances in Behavioral Economics," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 694-711, September.
    3. Mark J. Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 514-533, May.
    4. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413, October.
    5. Kelly L. Haws & William O. Bearden, 2006. "Dynamic Pricing and Consumer Fairness Perceptions," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 33(3), pages 304-311, October.
    6. Pascal Courty & Mario Pagliero, 2008. "Responsive pricing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(2), pages 235-259, February.
    7. Pascal Courty & Mario Pagliero, 2008. "Do Consumers Care about how Prices are Set?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(1), pages 27-43.
    8. Sam Peltzman, 2000. "Prices Rise Faster than They Fall," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 466-502, June.
    9. R. L. Hall & C. J. Hitch, 1939. "Price Theory And Business Behaviour," Oxford Economic Papers, Oxford University Press, vol. 0(1), pages 12-45.
    10. Alvin E. Roth, 2007. "Repugnance as a Constraint on Markets," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 37-58, Summer.
    11. 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 728-741, September.
    12. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
    13. 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).
    14. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-658, September.
    15. 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.
    16. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Leibbrandt, Andreas, 2020. "Behavioral constraints on price discrimination: Experimental evidence on pricing and customer antagonism," European Economic Review, Elsevier, vol. 121(C).
    3. Tobias Gesche, 2022. "Reference‐price shifts and customer antagonism: Evidence from reviews for online auctions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 558-578, August.
    4. 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, vol. 40(4), pages 529-545, November.
    5. Richards, Timothy J. & Liaukonyte, Jura & Streletskaya, Nadia A., 2016. "Personalized pricing and price fairness," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 138-153.
    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), vol. 51(3), pages 695-711, November.
    7. Andreas Leibbrandt, 2016. "Behavioral Constraints on Pricing: Experimental Evidence on Price Discrimination and Customer Antagonism," CESifo Working Paper Series 6214, CESifo.
    8. Richards, Timothy & Liaukonyte, Jura & Nadia, Streletskya, 2016. "Personalized Pricing and Price Fairness," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235809, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pascal Courty & Mario Pagliero, 2008. "Do Consumers Care about how Prices are Set?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(1), pages 27-43.
    2. Claudia Kwapil & Johann Scharler & Josef Baumgartner, 2010. "How are prices adjusted in response to shocks? Survey evidence from Austrian firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 151-160.
    3. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.
    4. Jean-Paul L'Huillier, 2012. "Consumers' Imperfect Information and Price Rigidities," EIEF Working Papers Series 1209, Einaudi Institute for Economics and Finance (EIEF), revised Aug 2012.
    5. Chen, Haipeng (Allan) & Levy, Daniel & Ray, Sourav & Bergen, Mark, 2008. "Asymmetric Price Adjustment in the Small," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 55(4), pages 728-737.
    6. Andreas Leibbrandt, 2016. "Behavioral Constraints on Pricing: Experimental Evidence on Price Discrimination and Customer Antagonism," CESifo Working Paper Series 6214, CESifo.
    7. Kim, Jinill & Ruge-Murcia, Francisco J., 2009. "How much inflation is necessary to grease the wheels?," Journal of Monetary Economics, Elsevier, vol. 56(3), pages 365-377, April.
    8. Young, Andrew T. & Levy, Daniel, 2014. "Explicit Evidence of an Implicit Contract," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 30(4), pages 804-832.
    9. Fabiani, S. & Druant, M. & Hernando, I. & Kwapil, C. & Landau, B. & Loupias, C. & Martins, F. & Mathä, T. & Sabbatini, R. & Stahl, H. & Stockman, A., 2005. "The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence," Working papers 135, Banque de France.
    10. Pascal Courty & Mario Pagliero, 2011. "Does responsive pricing smooth demand shocks?," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4707-4721.
    11. Edward S. Knotek, 2010. "The roles of price points and menu costs in price rigidity," Research Working Paper RWP 10-18, Federal Reserve Bank of Kansas City.
    12. Levy, Daniel, 2007. "Price Rigidity and Flexibility: New Empirical Evidence - Introduction to the Special Issue," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 28(7 (Specia), pages 639-647.
    13. 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, vol. 40(4), pages 529-545, November.
    14. Daniel Levy, 2007. "Price rigidity and flexibility: new empirical evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 639-647.
    15. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2017. "A theory of price adjustment under loss aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 78-95.
    16. Levy, Daniel & Snir, Avichai & Gotler, Alex & Chen, Haipeng (Allan), 2020. "Not all price endings are created equal: Price points and asymmetric price rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    17. Neuteleers, Stijn & Mulder, Machiel & Hindriks, Frank, 2017. "Assessing fairness of dynamic grid tariffs," Energy Policy, Elsevier, vol. 108(C), pages 111-120.
    18. Kehoe, Patrick & Midrigan, Virgiliu, 2015. "Prices are sticky after all," Journal of Monetary Economics, Elsevier, vol. 75(C), pages 35-53.
    19. Bechwati, Nada Nasr & Sisodia, Rajendra S. & Sheth, Jagdish N., 2009. "Developing a model of antecedents to consumers' perceptions and evaluations of price unfairness," Journal of Business Research, Elsevier, vol. 62(8), pages 761-767, August.
    20. Daniel Levy & Haipeng (Allan) Chen & Sourav Ray & Mark Bergen, 2004. "Asymmetric Price Adjustment in the Small: An Implication of Rational Inattention," Working Papers 2004-08, Bar-Ilan University, Department of Economics.

    More about this item

    Keywords

    D01; D12; L86.; Consumer demand; consumer antagonism; price variation; responsive pricing; fairness.; L86; fairness;
    All these keywords.

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-00840230. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.