Retailer Pricing and Consumer Choice under Price Uncertainty


Based on the implicit assumption that consumers’ average price perceptions guide their retailer choice, previous research examined how different retailer pricing strategies (frequent discounting, deep discounting and everyday low pricing) influence consumers’ price perceptions. In contrast to previous work, since In real life consumers often choose a retailer without prior knowledge of the retailer’s current prices and their choices are likely guided by the prices they encounter on previous shopping occasions, our focus is on this form of retailer choice – retailer choice under price uncertainty, and on consumers’ choices and resulting price perceptions. Drawing on the experienced based choice and the probability guessing literatures, we hypothesize that the choice share of the retailer that is cheaper more often will be greater, and conduct six studies that support this by demonstrating a choice advantage for a retailer that offers many small discounts or a consistently low regular price (EDLP retailer) over a retailer that offers infrequent deep discounts (depth retailer), and showing that these choice advantages persist even when the retailer is judged to have a higher average price than the depth retailer, and even when the total savings it offers is less than that of the depth retailer.