Seeking the perfect price: Consumer responses to personalized price discrimination in e-commerce

Abstract

This paper presents an empirical analysis of propositions concerning the consequences of price (un)fairness perceptions in personalized pricing based on individual consumer characteristics or customers’ previous purchase behavior. In three online experiments, we analyze consequences of personalized pricing for price-favored and price-disadvantaged customers in an e-commerce setting. Results reveal negative attitudinal and behavioral reactions to personalized pricing for both disadvantaged and even favored customers, mediated by price fairness perceptions. Respondents’ aversion to personalized pricing is confirmed by a second study applying a within-subject design. In addition, we evaluate consumers’ responses to various levels of information sensitivity in personalized pricing mechanisms and find that consumers generally refuse personalized pricing approaches regardless of the underlying personal data11We would like to thank the anonymous reviewers for their valuable input. The paper has benefitted from it a great deal..