Price Low and then Price High or Price High and then Price Low?

27 Pages Posted: 21 Feb 2010

See all articles by Stefania Sitzia

Stefania Sitzia

University of East Anglia

Daniel John Zizzo

University of Queensland - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 19, 2010

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 the opposite 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.

Keywords: consumer market, dynamic price strategies, shaping effects, bounded rationality

JEL Classification: C91, D03, D12, D21, L11

Suggested Citation

Sitzia, Stefania and Zizzo, Daniel John, Price Low and then Price High or Price High and then Price Low? (February 19, 2010). Available at SSRN: https://ssrn.com/abstract=1555860 or http://dx.doi.org/10.2139/ssrn.1555860

Stefania Sitzia

University of East Anglia ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

Daniel John Zizzo (Contact Author)

University of Queensland - School of Economics ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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