What’s That Plane Ticket Worth? Responding to Dynamic Pricing Strategies

Dynamic pricing has been utilized in a variety of contexts to frequently change prices with changes in demand or supply conditions, or to stimulate short-term demand. Its use historically has been limited due to the menu costs of changing price. However, advances in data-driven price modeling and Internet pricing capabilities have dramatically reduced these barriers and expanded the accessibility of dynamic pricing to marketers. While dynamic pricing offers the potential to increase firm profitability, it also increases buyer uncertainty about what they should be willing to pay, and when they should purchase. Research has found that consumers are often confused by dynamic pricing strategies (e.g., Cary 2004, Wirtz and Kimes 2007), perceive dynamic pricing to be unfair (Haws and Bearden 2006, Huang, Chang and Chen 2005, Kimes 2002), and generally do not understand these pricing approaches (Cary 2004). Previous consumer research has focused on the impact of dynamic pricing on various perceptual dimensions, such as price fairness, purchase satisfaction (Haws and Bearden 2006), price unfairness, perceived trust and (re)purchase intentions (Lee and Monroe 2008).