Effective Pricing Strategies: Investigating the Contrast Between Theory and Practice: An Abstract

Abstract

Anecdotal evidence suggests that companies tend to charge women a “gender tax” and women’s products often cost more than comparable men’s products. An important question arises: Is charging women a price surcharge conducive to higher revenues? In five studies, this paper shows that charging women price premiums could backfire and lower companies’ revenues and profits because on average women are more price-sensitive than men. This paper used diverse sources of data and myriad statistical analyses to make several substantive theoretical and practical contributions. First, using the population data set of 184,216 unique products, study 1 offered unambiguous evidence that Amazon.com charges men higher prices than women for selling them comparable products. Study 2 utilized a longitudinal sample of 424,000 products/day observations to show that Amazon’s gender-based price discrimination is likely to be the product of women’s higher price sensitivity. Studies 3 and 4 provided evidence that men are more likely to associate higher prices with higher levels of quality and value, and this is the likely underlying reason for the effect of gender on price elasticity. Finally, study 5 investigated the gender differences in thinking style as an alternative reason for gender differences in price elasticity.

To our knowledge, this paper is the first paper that offers empirical evidence that women are more price-sensitive than men. This finding has profound and expansive practical implications. Additionally, this paper provided further evidence that price creates a “placebo effect” on men that transcends their expectations and affects their experience of products. Finally, this paper offers an in-depth look into the pricing practices of the world’s largest online retailer. Therefore, we believe that the findings of our studies could serve academics, companies, and consumer organizations.

Future research should further examine the underlying reasons for the effect of gender on price elasticity. Study 1 showed that in beauty and personal care industry women’s products were generally more expensive than comparable men’s products. This could be the result of the level of involvement of consumers in the shopping process of these products. Nevertheless, more research is needed to establish (or refute) this postulation. Furthermore, future studies should investigate the moderating effect of hedonic/utilitarian, purchase frequency, and symbolic value of products in the relationship between gender and price elasticity of demand.