Are Consumers Vulnerable to Algorithmic Dynamic Pricing? An Empirical Investigation

This article examines consumer vulnerability in online transactions where e-retailers implement an algorithmic dynamic pricing (ADP) strategy reflected by real-time price adjustments. Based on an online survey on 763 French web-users, we provide evidence that the price variations due to ADP trigger feelings of being vulnerable and of loss of control over the transaction process. Even if consumers think they may eventually benefit from ADP, their concerns about becoming a victim of this pricing strategy appear as stronger. We further show evidence of emotional, social, and moral determinants of these different consumer vulnerability perceptions. Negative emotions and unethical evaluations of ADP are associated to higher overall perceived vulnerability. We also observe that consumer justice concerns reinforce the feeling of being vulnerable, while legal concerns influence the feeling of loss of control. Our findings suggest that firms implementing ADP need to have a more careful and cautious reflection about the potential of this pricing strategy to generate consumer vulnerability.