The Dynamic Environment of Pricing in E-Commerce and the Impact on Customer’s Behavior

Abstract

With the increase popularity and usage of online shopping, e-retailers are evolving their strategy to modify their prices for products and services. This leads to different charging costs for essentially the same good and can cause an outrage in customers. The aim of this article is to showcase relevant sources regarding the problem of fairness and the outcome this price strategy can cause within a consumer, while also covering an example of this dynamism in airline and hotel businesses. Results indicate that businesses should aim for a stable long term relationship with customers to win their loyalty, as they view small price changes as fair (e.g. roughly around 5% price difference). Future researches can focus on a combination of dynamic pricing and loyalty programs, to investigate whether substantial price differences (e.g. above 25%) could be accepted by loyal customers by including any additional benefits (e.g. discount bonus for the future).