Decoding Price Promotions: A Moderated Mediation Model of Fairness, Trust, and Deal Proneness

Abstract

Store pricing policy helps consumers form perceptions about the products as well as the store. This paper studies two commonly used pricing policies, EDLP and HiLo from the customers point of view. We contribute by breaking down these policies based the amount of variability and the degree of predictability. Consumers form perceptions of price fairness and store trust based on these pricing policies and consequently decide their purchase intentions. We observe that price fairness mediates between price variability and purchase intention. Different pricing policies are likely to attract different types of consumers. Some customers are likely to be driven by deals and discounts while others aren't. We show that trust mediates between variability and predictability of pricing and purchase intention for customers who are low on deal-proneness. We find that deal-proneness moderates the relationship between variability in pricing and trust. We use conditional process analysis to arrive at our results.