Price Variation Antagonism and Firm Pricing Policies
Title: Price Variation Antagonism and Firm Pricing Policies
Publisher: European University Institute
Series/Number: EUI ECO; 2008/02
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 the 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 demand variations. Holding average price and other variables constant, we find that demand is higher when prices vary more. The evidence suggests that the antagonism effect cannot be first order.
Subject: D01; D12; L86; Consumer demand; responsive pricing; fairness
Type of Access: openAccess