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Figure 1From “What is dynamic pricing?”

Estimated moves between buyer states after a price below, at or above the reference

In the estimated model, a relaxed buyer was vigilant at the next purchase event with a probability of 14.3% at the reference price and 21.1% after a price 10% above it.

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Figure 1Estimated moves between buyer states after a price below, at or above the reference

Horizontal bar chart from Zhang, Netzer and Ansari 2014, Table 7: estimated probability that a buyer moves between two latent states at the next purchase event. A relaxed buyer turns vigilant with 11.4 per cent after a price 10 per cent below the reference price, 14.3 per cent at the reference price and 21.1 per cent after a price 10 per cent above it. A vigilant buyer turns relaxed with 9.5 per cent, 7.7 per cent and 4.3 per cent in the same three cases.10%20%30%40%50%Turns vigilant: 10% below reference11.4%Turns vigilant: at reference14.3%Turns vigilant: 10% above reference21.1%Turns relaxed: 10% below reference9.5%Turns relaxed: at reference7.7%Turns relaxed: 10% above reference4.3%Estimated probability of the move at the next purchase event

Source: Zhang et al. (2014), p. 330, Table 7: posterior mean of the transition matrix across buyers, from a hidden Markov model estimated on the first 18 months (January 2007 to June 2008) of transactions by 1,859 buyers of one East Coast aluminum retailer, with July to September 2008 held out for validation. Turns vigilant: a buyer in the relaxed state at one purchase event is in the vigilant state at the next. Turns relaxed: the reverse. The price is set against the buyer's reference price, the quantity-weighted average of past prices, at the previous purchase event. The table's probabilities are shown as percentages.

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  • A ZNA14-C6 Prices enter as gains or losses against a reference price, the quantity-weighted average of the buyer's past prices; Table 7 (p. 330), posterior mean transition matrix across buyers: relaxed to vigilant 0.114, 0.143 and 0.211 after a price 10% below, at and 10% above the reference; vigilant to relaxed 0.095, 0.077 and 0.043; a price increase may move the buyer into a sticky state of higher price sensitivity; in simulated one-off price changes, losses persist longer than gains (pp. 321, 329 to 331): "we use the quantity-weighted average price the buyer observed in past purchase events as a reference price"; "the transition matrix when the price equals the reference price"; "Posterior Mean of the Transition Matrix Across Buyers"; "the likelihood of a buyer dropping from the relaxed to the vigilant state (14.3%) is almost twice as high as the likelihood of moving from the vigilant to the relaxed state (7.7%)"; "It should be noted that Table 7 presents transition matrices computed at the posterior mean."; "Thus, a price increase may have a long-term effect by transitioning the buyer to a (sticky) state of increased price sensitivity."; "the negative effects of a price hike (loss) on all four decisions persist longer than the positive effects of price drop (gain)"Zhang, Netzer & Ansari (2014) · zhang-netzer-ansari-2014-dynamic-targeted-pricing

Grades: A, verified against the printed page of the primary source · B, primary source, text layer only · C, authoritative secondary · D, reported.

From the essay

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APA 7

Isoglu, S. (2026). Estimated moves between buyer states after a price below, at or above the reference [Figure]. isoglu.com. https://isoglu.com/insights/exhibits/isoglu-2026-what-is-dynamic-pricing-fig01/

BibTeX
@misc{isoglu-2026-what-is-dynamic-pricing-fig01,
  author = {Isoglu, Sinan},
  title = {{Estimated moves between buyer states after a price below, at or above the reference}},
  year = {2026},
  howpublished = {Figure 1, isoglu.com},
  url = {https://isoglu.com/insights/exhibits/isoglu-2026-what-is-dynamic-pricing-fig01/},
  note = {From the essay {What is dynamic pricing?}}
}
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<figure>
  <a href="https://isoglu.com/insights/exhibits/isoglu-2026-what-is-dynamic-pricing-fig01/">
    <img src="https://isoglu.com/social/isoglu-2026-what-is-dynamic-pricing-fig01.png" alt="Figure 1: Estimated moves between buyer states after a price below, at or above the reference" width="3200" height="2400">
  </a>
  <figcaption>Figure 1: Estimated moves between buyer states after a price below, at or above the reference. Source: Zhang et al. (2014), p. 330, Table 7: posterior mean of the transition matrix across buyers, from a hidden Markov model estimated on the first 18 months (January 2007 to June 2008) of transactions by 1,859 buyers of one East Coast aluminum retailer, with July to September 2008 held out for validation. Turns vigilant: a buyer in the relaxed state at one purchase event is in the vigilant state at the next. Turns relaxed: the reverse. The price is set against the buyer&#39;s reference price, the quantity-weighted average of past prices, at the previous purchase event. The table&#39;s probabilities are shown as percentages. <a href="https://isoglu.com/insights/exhibits/isoglu-2026-what-is-dynamic-pricing-fig01/">View exhibit</a>.</figcaption>
</figure>

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