Price Variation Antagonism and Firm Pricing Policies
Title: Price Variation Antagonism and Firm Pricing Policies
Publisher: European University Institute
Series/Number: EUI ECO; 2006/27
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.
Subject: Consumer demand; price rigidity; responsive pricing; fairness
Type of Access: openAccess