Frontiers: Framing Price Increase as Discount: A New Manipulation of Reference Price

Sungsik Park (), Man Xie () and Jinhong Xie ()
Additional contact information
Sungsik Park: Darla Moore School of Business, University of South Carolina, Columbia, South Carolina 29201
Man Xie: Thunderbird School of Global Management, Arizona State University, Phoenix, Arizona 85004
Jinhong Xie: Warrington College of Business, University of Florida, Gainesville, Florida 32611

Marketing Science, 2023, vol. 42, issue 1, 37-47

Abstract: This research investigates a newly observed pricing practice by which a seller frames a price increase as a discount by simultaneously increasing the price and introducing a list price, a scheme we call “price-increase and list-price synchronization” (PILPS). To investigate this potentially deceptive practice, we tracked multiple product categories on Amazon over a 13-month period. We find that PILPS (1) is a prevalent practice adopted by a broad range of categories and sellers, (2) allows sellers to simultaneously achieve higher profit margins and a larger sales volume at consumers’ expense, and (3) is most effective for and more likely to be deployed by products with advantages in consumer reviews. Current regulations of deceptive pricing focus on the legitimacy of the value of a reference price by, for instance, deterring the use of fake or inflated list prices. PILPS, which misleads consumers by synchronizing the timing of a price increase with list-price introduction, has so far managed to fly under the regulatory radar. Our research provides the first empirical evidence of the existence, prevalence, and impact of this new manipulation of reference price. These results provide helpful insights for consumers, consumer advocates, and policy makers.

Keywords: list price; deceptive pricing; consumer protection; user reviews (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.2022.1402 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:42:y:2023:i:1:p:37-47

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().