Frontiers: Framing Price Increase as Discount: A New Manipulation of Reference Price

This research investigates a newly observed pricing practice by which a seller frames a price increase as a discount by simultaneously increasing the price and introducing a list price, a scheme we call “price-increase and list-price synchronization” (PILPS). To investigate this potentially deceptive practice, we tracked multiple product categories on Amazon over a 13-month period. We find that PILPS (1) is a prevalent practice adopted by a broad range of categories and sellers, (2) allows sellers to simultaneously achieve higher profit margins and a larger sales volume at consumers’ expense, and (3) is most effective for and more likely to be deployed by products with advantages in consumer reviews. Current regulations of deceptive pricing focus on the legitimacy of the value of a reference price by, for instance, deterring the use of fake or inflated list prices. PILPS, which misleads consumers by synchronizing the timing of a price increase with list-price introduction, has so far managed to fly under the regulatory radar. Our research provides the first empirical evidence of the existence, prevalence, and impact of this new manipulation of reference price. These results provide helpful insights for consumers, consumer advocates, and policy makers.

History: K. Sudhir served as the senior editor for this article. This paper was accepted through the Marketing Science: Frontiers review process.

Funding: S. Park gratefully acknowledges financial support from the Darla Moore School of Business Research Grant Program at the University of South Carolina. J. Xie gratefully acknowledges financial support from the JCPenney Endowed Professorship at the University of Florida.

Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mksc.2022.1402.