Consumer Evaluations of Multiple versus Single Price Change

Abstract

This article examines how consumer evaluations of multiple price changes differ from the evaluation of a single price change of an equal amount . Consistent with R. Thaler's theory about segregation versus integration of gains and losses, we find that multiple price decreases are evaluated more favorably than a single price decrease and multiple price increases are evaluated more unfavorably than a single price increase. However, these effects are moderated by consumer price uncertainty and relative magnitude of the prices being evaluated. Because price-uncertain consumers consider higher ranges of prices acceptable, they are less unfavorable to multiple price increases and more favorable to multiple price decreases than certain consumers. Moreover, when the magnitude of one price is very small relative to other prices, consumers' preference for multiple price decreases (relative to a single price decrease) is reduced. However, this effect is not found when there are price increases.