Spatial Competition on Psychological Pricing Strategies -- Preliminary Evidence from an Online Marketplace

TL;DR

This study examines how spatial proximity influences psychological pricing strategies on an online marketplace, revealing that sellers near competitors tend to adopt specific pricing endings, affecting buyer trust and pricing premiums.

Contribution

It provides empirical evidence that spatial proximity impacts psychological pricing strategies and highlights the role of trust signals in online marketplace pricing.

Findings

Proximity to competitors increases likelihood of psychological pricing.

Pricing strategy correlates with an average premium of 3.4%.

Trust signals like badges influence buyer trust and pricing.

Abstract

This paper investigates whether spatial proximity shapes psychological-pricing choices on Austria's C2C marketplace willhaben. Two web-scraped snapshots of 826 Woom Bike listings - a standardised product sold on the platform reveal that sellers near direct competitors are more likely to adopt 9-, 90-, or 99-ending prices, who also use such pricing strategy unconditional on product characteristics or underlying spatiotemporal differences. Such strategy is associated with an average premium of approximately cet. par. 3.4 %. Information asymmetry persists: buyer trust hinges on signals such as the "Trusted Seller" badge, and missing data on the "PayLivery" feature. Lacking final transaction prices limits inference.