Article ID Journal Published Year Pages File Type
884236 Journal of Economic Behavior & Organization 2010 15 Pages PDF
Abstract

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 this 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 fluctuations in demand and generates different amounts of price variability. We find that greater variability in prices does not lead to diminished demand. We discuss the implications of our findings in terms of the consumer antagonism hypothesis.

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Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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