Price stickiness and customer antagonism

Eric Anderson, Duncan I. Simester

Research output: Contribution to journalArticle

53 Scopus citations

Abstract

Managers often state that they are reluctant to vary prices for fear of "antagonizing customers." However, there is no empirical evidence that antagonizing customers through price adjustments reduces demand or profits. We use a 28-month randomized field experiment involving over 50,000 customers to investigate how customers react if they buy a product and later observe the same retailer selling it for less. We find that customers react by making fewer subsequent purchases from the firm. The effect is largest among the firm's most valuable customers: those whose prior purchases were most recent and at the highest prices.

Original languageEnglish (US)
Pages (from-to)729-765
Number of pages37
JournalQuarterly Journal of Economics
Volume125
Issue number2
DOIs
StatePublished - May 1 2010

ASJC Scopus subject areas

  • Economics and Econometrics

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