Still Attractive? The Effect of Dynamic Pricing on Consumers’ Perceived Value and Willingness to Pay for Luxury Fashion Products

Once only used for products such as flights and hotel rooms, dynamic pricing is growing in popularity as a pricing strategy across all products and markets. The purpose of this study is to explore the effect of dynamic pricing on consumers’ perceived values and willingness to pay for luxury fashion products by examining a luxury fashion brand that debuted a novel dynamic pricing policy on a new product line. This policy allowed the brand to gather data about demand for specific products but also made this fully transparent to consumers. Through a mixed method analysis, this study implies that the greater market transparency induced by dynamic pricing reduces consumers’ perceived value of these products and ultimately willingness to pay, and that this resulted in market inefficiencies for sellers. These results contribute to the literature on market transparency, dynamic pricing, and e-commerce and provide meaningful implications for luxury brand pricing strategies.