Socialize More, Pay Less: Randomized Field Experiments on Social Pricing

We propose social pricing, a novel pricing framework under which consumers with higher social capital enjoy a better price. Conceptually, social pricing enables firms to achieve price discrimination based on a consumer’s social value. This is in sharp contrast with traditional price discrimination strategies where price differentiation typically hinges on consumers’ personal value. We design and conduct two randomized field experiments on a leading online fresh food retailer to understand the value of social pricing. Social pricing has been commonly credited for its effectiveness in new customer acquisition. Interestingly, our study reveals that it is also highly effective on existing consumers. Our analysis shows that social pricing can increase an online retailer’s profit by 40% solely from existing consumers, compared with regular firm-offered discounts. Exploration of the underlying mechanisms reveals that perceived engagement and social cost are the main drivers, which not only help to increase purchasing frequency but also induce higher order value per purchase. In a follow-up experiment, we vary the rules of social interactions by requiring heterogeneity in consumers’ purchasing frequencies. The results suggest that a heterogeneity-based strategy can further amplify the benefits of social pricing.

Using a regression model for enhancing evaluation of regional purchasing power parities of the national currency with the main focus on teachers’ salaries in Russia

Introduction. Purchasing power of national currency varies widely across countries and regions, thus inter-regional comparisons pose a problem of financial and economic indicators comparability. In Russia, this issue is being currently solved by using the state budget expenditures index and the cost of a fixed set of goods and services (consumer basket) calculated for each region. The aim of this article is to propose and evaluate an alternative method of improving the accuracy of inter-regional price differentiation estimates. Materials and Methods. This study is based on the research investigation by Costa et al (2019) conducted on a sample of more than 300 regions of OECD countries. Relying on that research, the authors collected relevant data on Russian regions and analyzed a multiple linear regression model. Within the model, a consumer basket cost was a dependent variable, and the average income, the share of industry and the share of services in gross regional product were considered as independent variables. Results. The parameters of the model revealed an acceptable level of its explanatory power (R2 = 0.76), as well as a significant influence of all factors. Applying the model, the authors received the predicted consumer basket cost. Both types of the consumer basket costs (actual and predicted) were correlated with the external factors of regional price differentiation, selected from the literature as evaluation criteria: transport infrastructure quality, social inequality level, market competition level, regional fiscal policy, etc. The analysis revealed that significant correlations with the external parameters were higher for the predicted consumer basket cost as compared to the actual one. The possibility of using the results of this study to improve the accuracy of the comparative interregional analysis of financial and economic indicators is illustrated by the example of comparing the nominal and calculated adjusted values of teachers’ average salary in all regions of the Russian Federation. Conclusions. The findings suggest that the predicted consumer basket cost allows to conduct more accurate assessment of the differences in the national currency purchasing power in Russian regions. The results of the study can be used to improve the accuracy in comparative inter-regional investigations of financial and economic indicators.

Level and determinants of willingness to pay for rapid COVID-19 testing delivered through private retail pharmacies in Kenya.

To support the government response to the coronavirus disease 2019 (COVID-19) pandemic, accessible and sustainable testing approaches are needed. Private retail pharmacies are a key channel through which communities can access COVID-19 testing. We examined the level and determinants of the willingness to pay (WTP) for rapid COVID-19 testing delivered through private retail pharmacies in Kenya. Data was collected following a cross-sectional double-bounded dichotomous choice contingent valuation survey across 341 clients visiting five private retail pharmacies in Nairobi, Kisumu and Siaya counties. Our findings indicate mean and median WTP levels of KES 611 (US$ 5.59) and KES 506 (US$ 4.63), respectively. Estimated WTP varied across counties and increased with household income and self-reported interest in pharmacy-based COVID-19 rapid testing. These findings can inform price setting, price differentiation, price subsidization and other program design features geared towards enhancing affordability, equity, and uptake.

The moderating effect of agglomeration on horizontal differentiation and online reviews: the case of Paris hotels

PurposeHotels are immersed in a very competitive environment and hoteliers have to plan and redesign their strategies to stay in the hospitality industry while faced with a steady rise in competition. Hoteliers can employ horizontal differentiation strategies and pricing decisions to gain a competitive advantage over their competitors. The goal of our work is to analyse the effect of pricing and horizontal differentiation strategy of a hotel on its online reputation and to analyse if the hotel location and agglomeration of competitors moderates their relationship with online reputation.Design/methodology/approachWith a sample of 264 hotels from Paris, an empirical study is developed that aims to analyse, using regression techniques, the impact of price, differentiation, location and competitive environment on online ratings given by consumers in the hospitality context.FindingsThe paper provides empirical evidence of how a good location improves the online reputation of a company and how pricing strategies should take into account the location and number of competitors since a good location allows premium prices to be valued positively by consumers while an inappropriate location can produce the opposite effect. Depending on location, the number of competitors can intensify or reduce the effect of price on online reputation. Finally, online reputation only benefits from horizontal differentiation strategies when the degree of agglomeration is low.Originality/valueThis work provides insights about how hotels can strengthen their online reputation through pricing and differentiation strategies, incorporating elements of their environment such as location and competition in this decision-making process.

EQUALITY, THE CONSUMER PROTECTION ACT AND CUSTOMER-SEGMENT PRICING STRATEGIES: IS THERE RELIEF FOR THE POOR RICH TOURIST?

The year 2010 is Soccer World Cup year in South Africa. From watching the press and other media it quickly becomes apparent that this event is perceived as something of a cash cow to be used (and sometimes even abused) to generate maximum profit for certain industries and its businesses. Complaints have been made about airlines and accommodation establishments hiking prices excessively. The tourism industry has been warned about the negative impact such exorbitant prices may have on tourism in the future as South Africa may no longer be considered as a value-for-money destination. The hiking of prices is based on an anticipated increase in demand for certain services and products caused by the expected influx of soccer tourists. Businesses world-wide employ different pricing strategies to try and optimize revenue. One such pricing strategy that is employed is to differentiate between citizens and foreign nationals when charging for a service or product. This strategy in the context of the tourism industry is the focus of this note. Whilst the tourist is visiting South Africa s/he may want to visit some attractions and it is often at these places that an interestingsituation can be observed. International tourists have to pay one price whereas citizens pay a reduced price. For instance, a visit to the website of the Addo Elephant National Park reveals that SANParks asks different prices – for South African citizens and residents R30 per day visit, SADC nationals R60 per day visit, and foreign visitors R130 per day visit to the Addo Elephant National Park. Similar price differentiation is employed by private businesses as well. Other jurisdictions in Africa also make use of similar customer-segment pricing strategies. The Ugandan Wildlife Authority differentiates between admission fees for foreign non-residents and East-Africans to protected areas such as Lake Mburo and the Semuliki National Park. The Consumer Protection Act 68 of 2008 (hereinafter “the CPA”), once operational, will prohibit the charging of different prices for any goods or services to any persons or category of persons on the basis of one or more of the grounds of unfair discrimination contemplated in section 9 of the Constitution of the Republic of South Africa, 1996 (the Constitution) or Chapter 2 of the Promotion of Equality and the Prevention of Unfair Discrimination Act 4 of 2000 (hereinafter “the Equality Act”), amongst others. Does this mean that suppliers of services and products to tourists who differentiate in the prices asked between citizens and non-citizens will fall foul of this provision of the CPA? This is the question this note will endeavour to answer.

Lease Price Differentiation and its Influence on the Attraction of Micro, Small and Medium Enterprises’ (MSMES) to Major Shopping Malls in Zambia

Subject and purpose of work: Based on community-wide charges that shopping malls discriminate against small business tenants, this paper seeks: firstly to identify the principal determinants of shopping mall rentals, and secondly to understand if there exists a statistically significant dispersion in rentals against MSMEs. Materials and methods: Relative Importance Index and SPSS (statistical tests) were used to analyze the survey-based data which was acquired from eleven shopping malls in Lusaka. Results: The MSME tenants pay on average $20.32/m2 more t han anchor tenants and $19.12/m2 more than chain stores, ironically on account of capital limitations. MSMEs also face an additional risk during sudden economic shocks due to untenable lease provisions and poor negotiating influence. Conclusions: The study concludes by acknowledging that the MSME sector is covertly vitiated by the imposition of high rental premiums. It recommends that shopping malls should have an affirmative simpler letting policy. Furthermore, a shopping mall association should-be commissioned to exclusively safeguard the interests of MSMEs.

On Fine Wine Pricing across Different Trading Venues

This article examines how selected attributes of Bordeaux fine wines (producer, vintage, quality, bottle size, case, flaws, and transaction volume) affect prices in three types of trading venues: auctions, electronic exchange, and the over-the-counter (OTC) market. The findings indicate a price differentiation across the venues. Wine aging leads to relatively higher prices at auctions than on the electronic exchange or the OTC. There is a nearly linear relationship between prices and wine ratings, the strongest of which is found in the case of auctions. The bottle size effect is mostly positive for supersized formats and is the strongest on an electronic exchange and the weakest at auctions. The transaction volume negatively affects wine prices in all the trading venues. The simulation results facilitate the construction of more realistic trading models and may help traders make more informed decisions on the choice of a trading venue, depending on the wine characteristics. (JEL Classifications: D40, G12, Q14, L66)