Consumers Beware: Online Personalized Pricing in Action! How the Framing of a Mandated Discriminatory Pricing Disclosure Influences Intention to Purchase

Abstract

Online businesses collect a wealth of data on customers, often without properly informing them. Increasingly, these data can be used for behavioral price discrimination. In this two-study article, we explore how consumers would respond if businesses were compelled to disclose their use of discriminatory behavioral pricing techniques. Using different disclosure frames, we examine the effects of disclosure on purchase intention and purchase probability. The findings indicate that specific disclosure frames affect purchase intentions. Furthermore, we find that a disclosure frame that is more in line with a consumer’s self-interest increases purchase intention. Specifically, the frame indirectly influences intention to purchase through its effect on the perception that the use of behavioral pricing information serves self-interest. In this way, our study draws attention to a potentially unanticipated effect of regulatory intervention. Implications for future research and legal policy are discussed, focused on the need to design and empirically test the effectiveness of disclosures online.