Background Note | HBS Case Collection | May 1999

Note on Behavioral Pricing

by John T. Gourville

Abstract

The note introduces the behavioral or psychological aspects of consumer price acceptance. Begins by reviewing the traditional economic approach to product pricing and consumer price acceptance--namely, that consumers should be willing to purchase anytime a product's perceived value exceeds price. This purely economic approach questioned, and the concept of transaction "fairness" is introduced as an additional component of consumer price acceptance. Through paired vignettes, the behavioral side to product pricing is explored in some detail. In the end, the traditional economic perspective on product pricing is combined with the behavioral or psychological perspective to provide a more realistic understanding of how consumers respond to a firm's pricing decisions.

Keywords: Customer Satisfaction; Decisions; Fairness; Price; Marketing Strategy; Behavior; Perspective; Public Opinion;

Citation:

Gourville, John T. "Note on Behavioral Pricing." Harvard Business School Background Note 599-114, May 1999.