Consumer reaction to price increase: an investigation in gasoline industry

Abstract

Purpose – The aim of this study is to investigate the impact of increase in price of an essential product (i.e. gasoline) toward the focal product and other seemingly non-related products. Design/methodology/approach – A self-administered survey was used to collect data from the drivers at a large metroplex in Southwest USA. Multiple regression and scanning electron microscope procedures were used to analyze and test the proposed hypotheses. Findings – When consumers notice the increase in gas prices, they become very anxious. This anxiety is positively associated with average gas bought in gallons and negatively associated with threshold price. Further, this consumer anxiety has the strongest influence on lifestyle changes, followed by automobile technology change and transportation mode change, and has the weakest influence on gasoline brand/type change. Research limitations/implications – We focus on only anxiety as a mediator between increase in gas prices and the behavioral outcomes, and collect data from only one location. Practical implications – Managers must be cognizant that a price increase in essential goods not only influences the demand for focal products but also for products that may not seem related to the focal products. Social implications – Increase in gasoline price will not only affect the demand for gasoline, but also the demand for alternate forms of transportation, fuel efficient vehicles, and other aspects of life. Originality/value – This study is the first to look at the role of anxiety as a mediator and looks at the effects of increase in gas prices in a holistic manner.