When AI Sets the Price: How Consumers Interpret Price Formats and Intent

Abstract

As algorithmic pricing becomes more prevalent, understanding consumer responses to AI-set prices is increasingly important. Across two experiments with Chilean students (N = 165) and U.S. consumers (N = 631), we examined how the price-setting agent (AI vs. human) and price format (round vs. just-below) influence consumer responses. Study 1 provides directional evidence that consumers respond less favorably to AI-set prices and supports a preference for round over just-below prices when pricing is attributed to AI. Study 2 supports the less favorable response to AI pricing and provides directional evidence for the predicted price-format effect. Importantly, Study 2 provides evidence consistent with perceived manipulation as an underlying mechanism: just-below prices heighten perceptions that AI pricing is intended to influence or exploit consumers, reducing recommendation likelihood and purchase intention. These findings extend research on algorithmic pricing, psychological pricing, and digital nudging.