Price low and then price high or price high and then price low?

Stefania Sitzia and Daniel Zizzo
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Stefania Sitzia: School of Economics and CBESS, University of East Anglia

No 2010-08, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: The paper presents an experiment testing the hypothesis that, if consumers do not have well defined preferences and as a result their valuation of a new product is shaped by past experiences of prices, it may be more profitable for firms to follow a strategy of pricing high and then lower. We ran an individual choice experiment with a posted offer market setup, where different dynamic pricing strategies were implemented. We find evidence of preference shaping and the profitability of a 'high low' pricing strategy under a wide range of assumptions.

Keywords: consumer market; dynamic price strategies; shaping effects; bounded rationality. (search for similar items in EconPapers)
JEL-codes: C91 D03 D12 D21 L11 (search for similar items in EconPapers)
Date: 2010-01-01
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2010_08

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