Dynamic pricing: Consumer reactions and effective retailer responses

Vomberg, Arnd ; Homburg, Christian ; Sarantopoulos, Panagiotis

Document Type: Conference presentation
Year of publication: 2022
Conference title: EMAC 2022, European Marketing Academy Conference
Location of the conference venue: Budapest, Hungary
Date of the conference: 24.-27.05.2022
Related URLs:
Publication language: English
Institution: Business School > Digitales Marketing u. Marketing Transformation (Vomberg 2021-)
Subject: 330 Economics
Abstract: Prices become increasingly volatile in online markets due to dynamic pricing, conflicting with consumers’ preference for price stability. Drawing on price fairness and range-frequency theory, five studies explore the effects of dynamic pricing on consumer trust and price search behavior. Overall, consumers trust dynamic pricing retailers less and compare prices more frequently under dynamic pricing. However, the negative effect of dynamic pricing on trust is nullified if consumers have already experienced dynamic pricing (the habituation effect). Moreover, dynamic pricing’s effect on price search actually reverses (an asymmetric effect) if consumers are price-advantaged or dynamic pricing is the market norm—a favorable effect from a retailer’s perspective. To effectively manage dynamic pricing, managers should offer cash price-matching guarantees. Consumers trust dynamic-pricing retailers offering such guarantees more and compare prices less.

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