The reference price, used by consumers to evaluate market prices, has tremendous relevance in dynamic pricing. Reconciling current heterogeneous theories and studies on reference prices, this paper analyzes the impact of hotel price sequences on consumers' reference prices through a lab and a field experiment. Experiment 1 tests the importance of retrospective price evaluations, while Experiment 2 evaluates the impact of three forms of competition: (i) simultaneous behavior, where firms adjust prices simultaneously; (ii) leader-follower behavior, where one firm acts as the leader; and (iii) independent behavior, where each player takes its rival's strategy as given and seeks to maximize its own profits. The results show that consumers decrease their reference price when competing hotels adjust their prices simultaneously. Relevant managerial implications are drawn for the hospitality industry, which is affected by the presence of online travel agencies that announce the daily rates offered by each competitor. Keywords IntroductionSuppose that Carol wants to book a hotel room and begins checking prices (hotel rates) over the Internet. After several searches, she realizes that there is a certain degree of price variability each time she checks. To judge the prices she is offered, she can recall the prices she may have seen in the past, the prices paid for rooms at the same hotel, and/or the prices charged by similar competing hotels. What she has seen or paid in the past, along with the prices of comparable hotels, will influence her price evaluation.The issue of customers' price evaluations-how customers perceive prices and their variations-has become an important topic in hospitality management, particularly due to the widespread adoption of revenue management techniques by the lodging and travel industry.Dynamic pricing practices are now common and have become more feasible as Internet purchasing behavior has increased (Abrate et al., 2012). The widespread use of dynamic pricing is partly attributable to online tools, by which hotels can easily adjust prices in real time depending on the number of available rooms, the inventory and prices of close competitors, and other contextual indicators. However, though these pricing practices may benefit both sellers and buyers, consumers may perceive dynamic pricing as unfair because it produces a variety of rates for what appear to be identical products, such as the same hotel room (Choi and Mattila, 2005).The reference price is the standard against which consumers evaluate current product prices to assess their attractiveness (Monroe, 1973). Reference price has been the subject of a large body of research by both economists and marketing scholars. It can be conceptualized as a price expectation based on customers' memories of previous information (Mazumdar et al., 2005) or 2 as the normative price-the price considered a "fair" charge for the product (Bolton et al., 2003;Campbell, 1999).Several studies have underlined the importance of including customers' refe...

Purpose -The purpose of this paper is to describe the origins and development of the pricing function and to explore how companies are organizing for price management. Since the end of the 1990s, many companies have started initiatives towards price optimization, and moreover, have invested in pricing capabilities. The authors explain how the pricing function has evolved since then, and describe the roles and responsibilities assigned to pricing managers. Design/methodology/approach -The authors conducted an empirical qualitative research based on 28 interviews with pricing managers (analysts, directors, chief pricing officers) in large companies in France. A lexical analysis has been conducted in order to develop a typology of pricing orientations and a description of the different ways of performing the function within the company. Findings -The results describe three main stages (commodity, control, and value) corresponding to different levels of maturity of the pricing function. Many managers feel they lack opportunities to "push the price button"; this research shows that a progressive and systematic deployment of tools and capabilities allows companies to gain more pricing power. Originality/value -The authors describe three main orientations in organizing for pricing management, as degrees of maturity of the pricing function. Practitioners will find information on how to deploy the function in their organization useful given the variety of industries and pricing contexts studied.

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Purpose – Many companies lack insights or fact-based support for the pricing decisions they make in an increasingly complex environment. In order to optimize their pricing process, managers need to identify key indicators that may influence the performance of their decisions. The purpose of this paper is to report an investigation of pricing determinants in large companies manufacturing capital goods in France. First a conceptual framework is proposed, in order to fill several gaps identified in the literature on pricing practices and more precisely by operating a distinction between environmental variables (determinants), decision making (pricing strategy and price and product-line structures) and its consequence in terms of price level. Design/methodology/approach – The author conducted an empirical research on the determinants of the pricing process. This study consistedof a questionnaire survey addressed to pricing managers (or executives in charge of pricing) in 98 of the largest manufacturing companies in France about their new-product pricing decision-making process. Findings – The author studies environmental determinants and their influence on the pricing and describes the structure of pricing determinants as a five dimensions construct: market-based, value-based, position-based, competition-based and production-based. The results show that firms rely on environmental determinants as indicators of their pricing flexibility. These indicators operate as pricing levers: a good position on these variables gives firms more pricing power. But in the vast majority of the cases, companies extensively relied on competitive conditions instead of taking advantage of a favorable position, described as pricing myopia. Originality/value – This paper describes current pricing practices in leading companies with key informants (mainly pricing managers) highly involved in the pricing decision process, and contrasts two pricing orientations, pricing power vs pricing myopia.

As many surveys stated, companies are investing in better pricing processes, tools and capabilities. Among these companies, 42% consider that capturing the full value of products and services is one of the top challenges related to price setting and optimization. In addition, many improvements have been made recently in the way companies set an optimal price level and adapt their pricing processes. However, pricing decision-makers have to face a paradox: price setting is a left-brained (rational) process, whereas price perceptions and evaluations are right-brained (subjective). Tools available to solve this paradox are limited. Direct measures (price tresholds,...), Van Vestendorp’s PSM approach, conjoint measurement can be useful in assessing price evaluations but fail in measuring how consumers compare, evaluate and memorize price offers. Reference price, viewed as a standard against which the purchase price of a product is judged (Monroe, 1973), is one of the most studied constructs in research on strategic pricing decisions. As Kalyanaram and Winer (1995) stated, “reference price is a psychological construct which, when incorporated into normative models, can change the way marketing managers make decisions about price and promotions”. One stream of research has identified antecedents of reference price and has assessed their effects through experimentation, others have reported effects of reference price models on brand choice and other purchase decisions (Mazumdar et al. 2005). Many studies have examined and called for greater integration of different measures of reference price, noting that the research area is highly context specific (Lowe and Alpert, 2007). The purpose of this research is to operationalize a tool to measure and control contextual influences on reference price formation using a simulated experiment. The decision environment is generated and controlled in a lab setting using a software that simulates a purchase decision context and records the behaviours induced by that process. Contextual and temporal influences can be measured monitoring the total amount of information consulted for competing products (attributes and prices), as well as the time spent on information search. More specifically, this research evaluates the impact of search effort on the perceived reference price in the market at different points in time in the decision process.