Price low and then price high or price high and then price low?
Code:
10-08
Authors:
Sitzia, S. & Zizzo, D.
Date:
01 Jul 2010
Abstract
Price low and then price high or price high and then price low?
By Sitzia, S. & Zizzo, D.
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.
