Effects of price framing on consumers’ perceptions of online dynamic pricing practices
Purchase on Springer.com
$39.95 / €34.95 / £29.95*
Rent the article at a discountRent now
* Final gross prices may vary according to local VAT.
The viability of online dynamic pricing, or differential pricing for the same product from the same seller, is still debatable given the contradictory findings reported in both modeling and behavioral price research. This paper examines tactical ways for online merchants to mitigate consumers’ negative reactions when adopting dynamic pricing strategies. In three experiments, we show that using various price-framing tactics, compared to no framing, can induce price-disadvantaged consumers to perceive their ostensibly similar transactions differently relative to their comparative other parties. As the degree of perceived transaction dissimilarity increases, price-disadvantaged consumers’ perceived price fairness, trust, and repurchase intentions are enhanced. We further compare different price framing tactics and demonstrate that they have different effects on consumers across different product price levels, customer segments, and framing formats. The paper concludes with theoretical and managerial implications of the research.
- Adams, S. J. (1965). Inequity in social exchange. Advances in Experimental Social Psychology, 2, 267–299. CrossRef
- Angwin, J. & Mattioli, D. (2012). Coming soon: Toilet paper priced like airline tickets. Retrieved from http://online.wsj.com/article/SB10000872396390444914904577617333130724846.html.
- Bolton, L. E., Warlop, L., & Alba, J. W. (2003). Consumer perceptions of price (un)fairness. Journal of Consumer Research, 29, 474–491. CrossRef
- Campbell, M. C. (1999). Perceptions of price unfairness: antecedents and consequences. Journal of Marketing Research, 36, 187–199. CrossRef
- Campbell, L., & Diamond, W. D. (1990). Framing and sales promotions: the characteristics of a ‘Good Deal’. Journal of Consumer Marketing, 7, 25–31. CrossRef
- Chen, H., & Rao, A. (2007). When two plus two is not equal to four: errors in processing multiple percentage changes. Journal of Consumer Research, 34, 327–340. CrossRef
- Chen, S.-F. S., Monroe, K. B., & Lou, Y. C. (1998). The effects of framing price promotion messages on consumers’ perceptions and purchase intentions. Journal of Retailing, 74, 353–372. CrossRef
- Chen, Y., Narasimhan, C., & Zhang, Z. J. (2001). Individual marketing with imperfect targetability. Marketing Science, 20, 23–41. CrossRef
- Darke, P. R., & Chung, C. M. Y. (2005). Effects of pricing and promotion on consumer perceptions: it depends on how you frame it. Journal of Retailing, 81, 35–47. CrossRef
- Darke, P. R., & Dahl, D. W. (2003). Fairness and discounts: the subjective value of a bargain. Journal of Consumer Psychology, 13, 328–338. CrossRef
- DelVecchio, D. (2005). Deal-prone consumers’ response to promotion: the effects of relative and absolute promotion value. Psychology and Marketing, 22, 373–391. CrossRef
- Diamond, W. D. (1992). Just what is a ‘dollar’s worth’? Consumer reactions to price discounts vs. extra product promotions. Journal of Retailing, 68, 254–270.
- Diamond, W. D., & Sanyal, A. (1990). The effect of framing on the choice of supermarket coupons. Advances in Consumer Research, 17, 488–493.
- Elmaghraby, W., & Keskinocak, P. (2003). Dynamic pricing in the presence of inventory considerations: research overview, current practices, and future directions. Management Science, 49, 1287–1309. CrossRef
- Feinberg, F. M., Krishna, A., & Zhang, Z. J. (2002). Do we care what others get? A behaviorist approach to targeted promotions. Journal of Marketing Research, 39, 277–291. CrossRef
- Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18, 39–50. CrossRef
- Garbarino, E., & Maxwell, S. (2010). Consumer response to norm-breaking pricing events in e-commerce. Journal of Business Research, 63, 1066–1072. CrossRef
- Gelbrich, K. (2011). I have paid less than you! The emotional and behavioral consequences of advantaged price inequality. Journal of Retailing, 87, 207–224. CrossRef
- Gendall, P., Hoek, J., Pope, T., & Young, K. (2006). Message framing effects on price discounting. The Journal of Product and Brand Management, 15, 458–465. CrossRef
- Grewal, D., Hardesty, D. M., & Iyer, G. R. (2004). The effects of buyer identification and purchase timing on consumers’ perceptions of trust, price fairness, and repurchase intentions. Journal of Interactive Marketing, 18, 87–100. CrossRef
- Grewal, D., Ailawadi, K. L., Gauri, D., Hall, K., Kopalle, P., & Robertson, J. R. (2011). Innovations in retail pricing and promotions. Journal of Retailing, 87S, S43–S52. CrossRef
- Haws, K. L., & Bearden, W. O. (2006). Dynamic pricing and consumer fairness perceptions. Journal of Consumer Research, 33, 304–311. CrossRef
- Inman, J. J., McAlister, L., & Hoyer, W. D. (1990). Promotion signal: proxy for a price cut? Journal of Consumer Research, 17, 74–81. CrossRef
- Kahneman, D., & Tversky, A. (1979). Prospect theory: an analysis of decision under risk. Econometrica, 47, 263–292. CrossRef
- Kahneman, D., Knetsch, J. L., & Thaler, R. (1986). Fairness as a constraint on profit seeking: entitlements in the market. American Economic Review, 76, 728–741.
- Kannan, P. K., & Kopalle, P. K. (2001). Dynamic pricing on the internet: importance and implications for consumer behavior. International Journal of Electronic Commerce, 5, 63–83.
- Krishna, A., Briesch, R., Lehmann, D. R., & Hong, Y. (2002). A meta-analysis of the impact of price presentation on perceived savings. Journal of Retailing, 78, 101–118. CrossRef
- Kung, M., Monroe, K. B., & Cox, J. L. (2002). Pricing on the internet. The Journal of Product and Brand Management, 11, 274–287. CrossRef
- Monroe, K. B. (2003). Pricing: Making profitable decisions (3rd ed.). Burr Ridge: McGraw-Hill/Irwin.
- Monroe, K. B., & Lee, A. Y. (1999). Remembering vs. knowing: issues in buyers’ processing of price information. Journal of the Academy of Marketing Science, 27, 207–225. CrossRef
- Morwitz, V. G., Greenleaf, E. A., & Johnson, E. J. (1998). Divide and prosper: consumers’ reactions to partitioned prices. Journal of Marketing Research, 35, 453–463. CrossRef
- Mussweiler, T. (2003). Everything is relative: comparison processes in social judgement. European Journal of Social Psychology, 33(6), 719–733. CrossRef
- Raghubir, P. (2004). Free gift with purchase: promoting or discounting the brand? Journal of Consumer Psychology, 14, 181–186. CrossRef
- Rosenthal, R., & Rosnow, R. L. (2008). Essentials of behavioral research: Methods and data analysis (3rd ed.). New York: McGraw-Hill.
- Sahay, A. (2007). How to reap higher profits with dynamic pricing. MIT Sloan Management Review, 48, 53–60.
- Sanburn, J. (2012). Delta appeared to overcharge frequent flyers for weeks-was that legal? Retrieved from http://moneyland.time.com/2012/05/21/delta-overcharged-frequent-flyers-for-weeks-was-that-legal/.
- Shaffer, G., & Zhang, Z. J. (2000). Pay to switch or pay to stay: preference-based price discrimination in markets with switching costs. Journal of Economics and Management Strategy, 9, 397–424. CrossRef
- Suri, R., Long, M., & Monroe, K. B. (2003). The impact of the internet and consumer motivation on evaluation of prices. Journal of Business Research, 56, 379–390. CrossRef
- Suri, R., Monroe, K. B., Koc, U. (2013). Math anxiety and its effect on consumers’ preferences for price promotion formats. Journal of the Academy of Marketing Science, (forthcoming).
- Taylor, C. R. (2003). Supplier surfing: competition and consumer behavior in subscription markets. RAND Journal of Economics (RAND Journal of Economics), 34, 223–246. CrossRef
- Thaler, R. (1985). Mental accounting and consumer choice. Marketing Science, 4, 199–214. CrossRef
- Tsai, D., & Lee, H.-C. (2007). Will you care when you pay more? The negative side of targeted promotions. The Journal of Product and Brand Management, 16, 481–491. CrossRef
- Xia, L., & Monroe, K. B. (2005). Comparative references and the effects of price unfairness perceptions, working paper, Bentley College.
- Xia, L., & Monroe, K. B. (2010). Is a good deal always fair? Examining the concepts of transaction value and price fairness. Journal of Economic Psychology, 31, 884–894. CrossRef
- Xia, L., Monroe, K. B., & Cox, J. L. (2004). The price is unfair! A conceptual framework of price fairness perceptions. The Journal of Marketing, 68, 1–15. CrossRef
- Effects of price framing on consumers’ perceptions of online dynamic pricing practices
Journal of the Academy of Marketing Science
Volume 41, Issue 5 , pp 501-514
- Cover Date
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Dynamic pricing
- Price framing
- Transaction dissimilarity
- Price fairness
- Industry Sectors
- Author Affiliations
- 1. College of Business Administration, The University of Texas—Pan American, Edinburg, TX, 78539, USA
- 2. University of Illinois at Urbana-Champaign, University of Richmond, 11357 Nuckols Road, #128, Glen Allen, VA, 23059, USA
- 3. Robins School of Business, University of Richmond, Richmond, VA, 23173, USA