Customers’ asymmetrical responses to variable pricing

Abstract

This study investigates customer reactions to variable pricing (that is, being charged different prices for the same goods or services at one point in time across different markets) and finds that customers show asymmetrical responses to an increase in price difference. Specifically, customers who pay a higher price show stronger intentions to switch stores, to complain and to spread negative word-of-mouth when price difference gets larger, while the same amount of increase in price difference shows no effect on those who pay a lower price. In addition, negative emotions experienced by customers mediate the relationship between unfairness perception and behavioural responses. Results suggest that managers should exercise extra caution when introducing a relatively large price difference, and they should try to manage customers’ in-store emotional state to reduce the negative effects of variable pricing.