Retailer Pricing Strategy and Consumer Choice Under Price Uncertainty

Posted: 27 Oct 2015

See all articles by Shai Danziger

Shai Danziger

Coller School of Management

Liat Hadar

Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship

Vicki Morwitz

New York University (NYU) - Department of Marketing

Date Written: October 26, 2015

Abstract

This research examines how consumers choose retailers when they are uncertain about store prices prior to shopping. Simulating everyday choice, participants made successive retailer choices where on each occasion they chose a retailer and only then learned product prices. The results of a series of studies demonstrated that participants were more likely to choose a retailer that offered an everyday low pricing strategy (EDLP) or that offered frequent small discounts over a retailer that offered infrequent large discounts. This choice advantage for the retailer that was cheaper more often manifested even when its average price was judged to be higher. The same results were obtained when choices were made a day apart, when price feedback was only given for the chosen retailer, and when it was given for both retailers. Participant’s expectations of future prices but not their judgments of retailer’s past average prices, predicted their subsequent retailer choice.

Keywords: Retailer pricing, price perception, experience-based choice, mental accounting

JEL Classification: D01

Suggested Citation

Danziger, Shai and Hadar, Liat and Morwitz, Vicki, Retailer Pricing Strategy and Consumer Choice Under Price Uncertainty (October 26, 2015). Journal of Consumer Research, Vol. 41, 2014, Available at SSRN: https://ssrn.com/abstract=2680126

Shai Danziger

Coller School of Management ( email )

Tel Aviv
Israel

HOME PAGE: http://https://en-coller.tau.ac.il/profile/shaid

Liat Hadar (Contact Author)

Interdisciplinary Center (IDC) Herzliyah - Adelson School of Entrepreneuship ( email )

P.O. Box 167
Herzliya, 46150
Israel

Vicki Morwitz

New York University (NYU) - Department of Marketing ( email )

Henry Kaufman Ctr
44 W 4 St.
New York, NY
United States

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