 Dynamic pricing and reference price effectsDavid Prakash and Martin Spann Journal of Business Research, 2022, vol. 152, issue C, 300-314 Abstract: Dynamic pricing enables online retailers to dynamically adjust prices in response to demand and supply conditions. However, dynamically changing prices may also affect how consumers assess current retail prices compared to their internal reference prices. This paper develops propositions for the influence of dynamic pricing on the internal reference price effect based on a reduced demand model, and tests these propositions with a field experiment and an online lab experiment. Both experiments systematically manipulate two dimensions of dynamic price variation (amplitude and frequency). We find that customers react strongly to price increases but not to price reductions. However, higher amplitude, as well as the higher frequency of price changes, attenuate the internal reference price effects in the field experiment. The online lab experiment provides additional insights in a more controlled setting measuring the internal reference price and additional covariates. Therefore, dynamic pricing can provide an additional benefit for retailers by attenuating potentially detrimental reference price effects on demand. Keywords: Dynamic Pricing; Reference Price; Field Experiment; Lab Experiment; Online Retailing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:152:y:2022:i:c:p:300-314 DOI: 10.1016/j.jbusres.2022.07.037 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
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