Customer Cognitive Appraisals of Differential and Dynamic Pricing

Abstract

This study examines the mechanisms of cognitive appraisal theory in the context of dynamic pricing. The aim is to investigate the differences in cognitive appraisals by comparing dynamic pricing and simpler forms of price differentiation, as well as differences in appraisals between goods and services. The reactions examined in one qualitative and one quantitative study are the customers’ feelings of being exploited, price complexity perceptions, and intentions to spread online word-of-mouth (eWOM). The qualitative results indicate that customers are less aware of dynamic pricing for goods than services and that there is a strong feeling of being exploited, which can lead to negative word-of-mouth. The quantitative results support these findings as customers react more negatively to dynamic pricing than to simpler forms of differential pricing. For goods, intentions to spread eWOM are mainly driven by feelings of being exploited, while for services, the main effect runs through price complexity perceptions.