Companies that use pricing tactics such as dynamic pricing are often considered norm-violating by customers, which in turn negatively influences fairness perceptions and increases customer retaliations. Moreover, only a handful of companies disclose information about the pricing criteria, potentially leaving customers feeling confused, resulting in higher perceptions of price complexity. This research will lead to a better understanding of whether dynamic pricing strategies can be used by companies without the formation of negative perceptions by customers, and if mitigation attempts using explanations are effective. We tested four pricing tactics (uniform pricing, dynamic pricing without an explanation, with a short or a complete explanation) applied to a touristic flight, and measured price fairness and complexity perceptions, as well as purchase and complaint intentions. The results show that additional explanations about dynamic pricing can fully restore fairness perceptions to the same level as uniform pricing but at the same time do not fully eliminate perceptions of complexity. The results for the second level consumer response variables, purchase and complaint intentions, show that at least a complete explanation of the criteria used for dynamic pricing helps to establish intentions that are as high as in the case of uniform prices.
Consumer Reactions to Dynamic Pricing as a Norm-Breaking Practice with Increasing Levels of Company Clarifications