Essays on Dispersion, Fairness Perception and Partitioning of Online Prices

Abstract

My dissertation is primarily on online pricing, by empirically investigating how formats and structures of prices influence consumer responses and subsequent purchasing behavior, brand choice, etc. Currently, three essays of my dissertation explore topics on price fairness perception, price dispersion, as well as price partitioning. First, although previous researchers have tested effects of price changes on consumer's perceptions on price (e.g., Maxwell 1999, Campbell 2007), little work has focused on the effects of prices/costs levels on online price judgments and virtually none has examined it jointly with both internal/external reference prices from multiple comparison parties. Less work has applied price decreasing and increasing together to observe (un)fairness or associated them with asymmetric liking and disliking judgments (Herr and Page 2004). To fill this gap, we employ an expected utility model incorporating emotional factors such as disappointment (elation) and regret (rejoicing) to model online price fairness perceptions. We demonstrate a two-stage evaluation and find interesting asymmetric patterns of significant effects of four emotions on price fairness. Second, there does not exist yet a quantitative review synthesizing and explaining the discrepancy of findings on price dispersion. An empirical generalization is conducted to statistically and quantitatively summarize in which way online price dispersion goes, and what are the true determinants of the magnitude of price dispersion in E-commerce. By a meta-analysis study, we find that product category, measurement of price dispersion, controlling for heterogeneity in the study and so on, are significant factors. Third, shipping and handling (S&H) fee is examined as a popular form of partitioned price offered by E-tailers. We employ a Gain-and-Loss Utility model incorporating different levels of price gains and losses presented to customers in the transactions to model online purchase behaviors in a strategic pricing framework. We find significant asymmetry in the effects of price surcharges and price discounts on purchase quantity as well as on how customers organize and manage their shopping baskets.