Sharing Economy, Platforms, and Crowds
Paper Number
2297
Paper Type
Completed
Description
Technological advancements simplify the application of dynamic pricing, i.e., the flexible and rapid adjustment of prices to changes in demand. Consequently, companies increasingly use dynamic pricing in their business models, although research reports negative consequences on customer fairness perceptions. This holds not only for one-sided businesses, but also for popular two-sided platforms. However, these platforms differ from one-sided businesses in that the total prices paid by customers consist of product prices and platform fees – and both price components can be dynamically adjusted. In an online experiment, we examine customers’ fairness perceptions and purchase intentions when product price and platform fee change dynamically. We find that dynamic price increases reduce fairness perceptions and purchase intentions, while the cause of the price increases is irrelevant to customers. These results indicate an imbalance in the risks and benefits of dynamic pricing between the pricing strategies of the platform and the provider.
Recommended Citation
Röder, Andreas; Bohnen, Eva; Züllig, Kilian; Kupfer, Alexander; and Zimmermann, Steffen, "Dynamic Pricing on Two-Sided Platforms: Consequences on Customers’ Fairness Perceptions and Purchase Intentions" (2023). ICIS 2023 Proceedings. 7.
https://aisel.aisnet.org/icis2023/sharing_econ/sharing_econ/7
Dynamic Pricing on Two-Sided Platforms: Consequences on Customers’ Fairness Perceptions and Purchase Intentions
Technological advancements simplify the application of dynamic pricing, i.e., the flexible and rapid adjustment of prices to changes in demand. Consequently, companies increasingly use dynamic pricing in their business models, although research reports negative consequences on customer fairness perceptions. This holds not only for one-sided businesses, but also for popular two-sided platforms. However, these platforms differ from one-sided businesses in that the total prices paid by customers consist of product prices and platform fees – and both price components can be dynamically adjusted. In an online experiment, we examine customers’ fairness perceptions and purchase intentions when product price and platform fee change dynamically. We find that dynamic price increases reduce fairness perceptions and purchase intentions, while the cause of the price increases is irrelevant to customers. These results indicate an imbalance in the risks and benefits of dynamic pricing between the pricing strategies of the platform and the provider.
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