{"id":155627,"date":"2026-04-23T10:39:07","date_gmt":"2026-04-23T15:39:07","guid":{"rendered":"https:\/\/uwm.edu\/news\/?p=155627"},"modified":"2026-04-23T10:52:08","modified_gmt":"2026-04-23T15:52:08","slug":"the-hidden-psychology-behind-simple-pricing-amid-the-rise-of-ai","status":"publish","type":"post","link":"https:\/\/uwm.edu\/news\/the-hidden-psychology-behind-simple-pricing-amid-the-rise-of-ai\/","title":{"rendered":"The hidden psychology behind simple pricing amid the rise of AI"},"content":{"rendered":"<p style=\"font-weight: 400\">As artificial intelligence enables businesses to fine-tune prices to closely reflect products\u2019 cost or value, it may seem natural to assume that more differentiated pricing leads to better profits. But new research from UW-Milwaukee suggests the opposite can be true: Fewer, well-designed price points may work better.<\/p>\n<p style=\"font-weight: 400\">Walk into a store like Five Below or buy a movie ticket at AMC Theatres, and you\u2019ll notice something curious: Very different products often share the exact same price. A basketball, a phone accessory and a water bottle all might cost $5. A blockbuster film and a lesser-known movie might carry the same ticket price.<\/p>\n<p style=\"font-weight: 400\"><a href=\"https:\/\/pubsonline.informs.org\/doi\/10.1287\/mksc.2023.0133\">According to new research<\/a>, that\u2019s not a coincidence. It\u2019s a strategy.<\/p>\n<p style=\"font-weight: 400\">A study by Zuhui Xiao, assistant professor of marketing in UWM\u2019s Lubar College of Business, examines a common practice known as \u201cclass pricing.\u201d This is a method where businesses group a wide range of products into just a few price points. While this may seem to go against basic economics \u2013 which suggests prices should reflect a product\u2019s cost or value \u2013 the research shows that consumer psychology plays a powerful role.<\/p>\n<p style=\"font-weight: 400\">Instead of judging prices in isolation, people compare them to what they expect to pay. When a price feels lower than expected, it creates a sense of gain. When it feels higher, it creates a sense of loss. Because losses tend to loom larger than gains, consumers often dislike overpaying more sharply than they enjoy getting a bargain.<\/p>\n<p style=\"font-weight: 400\">Class pricing helps reduce those negative comparisons.<\/p>\n<p style=\"font-weight: 400\">\u201cWhen prices are simplified, consumers are less likely to feel like they\u2019re overpaying,\u201d Xiao said. \u201cThat makes them more comfortable making a purchase.\u201d<\/p>\n<p style=\"font-weight: 400\">In other words, fewer price points can lead to fewer second thoughts.<\/p>\n<p style=\"font-weight: 400\">The findings suggest that businesses aren\u2019t just setting prices based on cost or value \u2013 they\u2019re carefully shaping how customers experience those prices. When firms adopt more differentiated pricing across a price line, shoppers tend to resent higher-priced options more than they reward lower-priced alternatives, making expensive items look worse than the actual price difference alone would imply. By limiting the number of price points, companies can reduce these unfavorable comparisons, helping higher-priced products preserve more of their prestige and improving overall profitability.<\/p>\n<p style=\"font-weight: 400\">\u201cConsumers don\u2019t evaluate prices one by one. They compare what they see to what they expect, and that shapes whether a price feels like a good deal,\u201d Xiao said.<\/p>\n<p style=\"font-weight: 400\">The strategy is already widely used in retail, entertainment and beyond. As companies look for ways to attract price-sensitive consumers, especially during times of economic uncertainty, simple pricing models may become even more common. Even with advanced AI pricing algorithmic tools, more flexibility in setting more differentiated prices does not necessarily lead to higher profits. In many cases, simpler pricing tiers are more effective.<\/p>\n<p style=\"font-weight: 400\">For shoppers, the takeaway is straightforward: That clean, simple price tag may feel like a good deal \u2013 <span data-olk-copy-source=\"MessageBody\">and that\u2019s by design<\/span>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With the rise of artificial intelligence and big data, businesses can fine-tune prices to try to maximize profit. But new research from UW-Milwaukee suggests the opposite can be true: Fewer, better-designed price points may work better.<\/p>\n","protected":false},"author":3151,"featured_media":155628,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","uwm_wg_additional_authors":[]},"categories":[174,175],"tags":[],"section":[132,246],"display_categories":[115,116],"related-coverage":[338],"uwmnews-feed":[162],"class_list":["post-155627","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","category-research","section-business","section-business-world-affairs","display_categories-top-story-secondary","display_categories-top-story-section","related-coverage-research","uwmnews-feed-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.3 (Yoast SEO v27.3) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>The hidden psychology behind simple pricing amid the rise of AI<\/title>\n<meta name=\"description\" content=\"With the rise of artificial intelligence and big data, businesses can fine-tune prices to try to maximize profit. But new research from UW-Milwaukee suggests the opposite can be true: Fewer, better-designed price points may work better.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/uwm.edu\/news\/the-hidden-psychology-behind-simple-pricing-amid-the-rise-of-ai\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The hidden psychology behind simple pricing amid the rise of AI\" \/>\n<meta property=\"og:description\" content=\"With the rise of artificial intelligence and big data, businesses can fine-tune prices to try to maximize profit. But new research from UW-Milwaukee suggests the opposite can be true: Fewer, better-designed price points may work better.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/uwm.edu\/news\/the-hidden-psychology-behind-simple-pricing-amid-the-rise-of-ai\/\" \/>\n<meta property=\"og:site_name\" content=\"UWM REPORT\" \/>\n<meta property=\"article:published_time\" content=\"2026-04-23T15:39:07+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-04-23T15:52:08+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/uwm.edu\/news\/wp-content\/uploads\/sites\/41\/2026\/04\/Zuhui-Xiao750x500-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"750\" \/>\n\t<meta property=\"og:image:height\" content=\"500\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"John G. 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