Pricing Games: How Algorithms Are Breaking Consumer Trust

Why Consumers Don’t Trust Algorithmic Pricing

Have you ever noticed the price of something you’re about to buy suddenly change? Maybe it’s cheaper one minute, then skyrockets the next. This isn’t a random glitch—it’s called Algorithmic Dynamic Pricing (ADP), a strategy where companies use algorithms to adjust prices based on factors like demand, competition, or even your browsing habits. While this might sound like a clever way to optimize pricing, it’s causing a big problem: consumers are losing trust in companies that use it.

As someone who has spent decades studying trust—its decline and its financial impact—I can tell you that trust is not just a feel-good concept. It’s the foundation of successful relationships, including those between customers and businesses. My doctoral research on trust in negotiations revealed how fragile it is and how quickly financial consequences follow when trust is broken. A recent study by Arnd Vomberg (HEC Paris), Christian Homburg (University of Mannheim), and Panagiotis Sarantopoulos (Athens University of Economics and Business) in the International Journal of Research in Marketing backs this up: trust in organizations using algorithmic pricing is eroding, and the financial fallout is significant.

The Trust Problem

1. It Feels Unfair

Trust breaks down when people feel exploited, and ADP often leaves customers with exactly that feeling. The study shows that consumers expect prices to stay stable for a reasonable period. When prices fluctuate randomly or seem designed to squeeze more out of them, customers feel cheated.

2. It’s Confusing

Pricing algorithms are a mystery to most people, and companies rarely explain how they work. This lack of transparency fuels suspicion that companies are using algorithms to manipulate customers. The study found that this perceived lack of fairness undermines trust, making consumers wary of engaging with ADP-driven companies.

3. Regional Pricing Feeds Distrust

The problem becomes even more apparent when regional pricing differences come into play. Imagine booking a flight: you check the price using your usual browser, and it seems high. Then you log in using a VPN to mimic being in another country, and suddenly the fare drops by $748. The study highlights how such practices heighten consumer distrust. Regional pricing gives the impression that companies are using algorithms not just to optimize prices but to exploit differences in geography or perceived buying power.

4. It Promotes Distrustful Behavior

Unpredictable pricing leads consumers to spend more time searching for deals. The study revealed that ADP drives shoppers to compare prices more frequently, revisit stores, and delay purchases, clear indicators that they don’t trust what’s being offered.

The Evidence

Vomberg, Homburg, and Sarantopoulos’s study, which included real-world observations and experiments with thousands of participants, confirmed that consumers trust ADP-driven retailers significantly less than those using stable, predictable pricing. Even when ADP becomes the market norm, this skepticism persists—consumers may accept it as unavoidable but remain distrustful.

The financial implications are clear: distrust pushes customers toward competitors, reduces loyalty, and increases price sensitivity. When customers feel exploited—whether by regional pricing differences or unexplained fluctuations—they're less likely to return.

Can Companies Rebuild Trust?

Despite the challenges, companies can take steps to rebuild trust while using ADP:

1. Be Transparent

Explain why prices change. For example, make it clear that a price drop reflects market competition or inventory levels—not an attempt to manipulate certain regions or customer profiles. When consumers understand the rationale, they’re more likely to trust the process.

2. Offer Price-Matching Guarantees

Reassure customers they’re getting a fair deal, no matter where they are. Price-matching policies or guarantees can go a long way in restoring trust, especially when regional pricing differences are involved.

3. Commit to Fair Practices

Build consistency into pricing strategies. While some fluctuation is inevitable with ADP, it should be tied to clear and understandable patterns, not the appearance of geographic or demographic targeting.

Trust Is a Financial Asset

Trust isn’t just a nice-to-have—it’s a business necessity. My years of research confirm that trust delivers financial dividends, whether in negotiations or customer relationships. ADP may drive short-term profits, but if companies fail to manage the trust deficit, they’ll pay the price in the long term.

When consumers see prices drop $748 just by using a VPN, it sends a clear message: the system isn’t designed to treat everyone equally. Without transparency, fairness, and clear customer communication, companies risk losing not just trust but loyalty, reputation, and revenue. Trust, once lost, is expensive to rebuild. Organizations using ADP must prioritize trust if they want sustainable success.

Dr. Keld Jensen (DBA) , the acclaimed author of 27 books, is a leading expert in SMARTnership Negotiation. He advises globally on negotiation strategies, teaches NegoEconomics and TrustCurrency, and collaborates with top professionals to enhance negotiation practices. A sought-after speaker, he regularly conducts keynotes and webinars, empowering individuals and organizations to achieve optimal negotiation outcomes.

Jensen's innovative approaches and extensive research have transformed traditional negotiation methods, making him a trusted advisor in the public and private sectors. His work emphasizes collaboration, trust, and mutual value creation, setting new standards in negotiation.

His latest book 'The Elements of Negotiation' is published on Wiley and available everywhere and on Amazon. https://www.amazon.com/Elements-Negotiation-Tactics-Everyone-Each/dp/1394248288/ref=sr_1_1?crid=321JTWIW6GF52&dib=eyJ2IjoiMSJ9.zLm3S_dvbYZZ9n3-VDYfLw.u_ygIew3EzsgLsN0qFv9QCwUjFRZ9YfJ7DU9xDpDrrk&dib_tag=se&keywords=keld+jensen+the+elements+of+negotiation&qid=1733720484&sprefix=keld+%2Caps%2C197&sr=8-1