Feeling ripped off? How dynamic pricing affects perceptions of fairness

October 18, 2006

Dynamic pricing, in which sellers make frequent adjustments to their prices, has become more feasible as internet buying increases. In the first study to examine how such pricing strategies affect perceptions of fairness, researchers from the University of South Carolina found that fairness judgments about fluctuating prices depend heavily on time and whether the buyer is involved in setting the price.

"Although fairness is a difficult concept to define, the perception of price fairness is part of a broader judgment of the overall merits of a deal," explain Kelly L. Haws and William O. Bearden.

In a paper appearing in the December issue of the Journal of Consumer Research, the researchers distinguish between "price-posted mechanisms," in which the price is set by the seller, and "price-discovery mechanisms," such as eBay or Priceline, in which prices are negotiated. In a series of three studies, they find that consumers will consider a price unfair if it differs from the price paid by other consumers and if they are not involved in the price-setting process.

"Consumers have higher fairness perceptions and satisfaction regardless of the price level when they play a role in the price setting process rather than when prices are set by the retailer," the researchers explain. Additionally, "consumers view price changes within very short time periods as more unfair than changes over a more extended time period."

The researchers point out that the effects of dynamic pricing explained in their study may be even more pronounced when varying prices are encountered in realistic shopping environments.

Citation: Kelly L. Haws and William O. Bearden, "Dynamic Pricing and Consumer Fairness Perceptions." Journal of Consumer Research: Dec. 2006.

Source: University of Chicago

Explore further: RePhone kit offer calls up maker dreams of DIY modules

Related Stories

RePhone kit offer calls up maker dreams of DIY modules

September 25, 2015

Introducing an open source and modular phone—these words, as we know from the anticipation engulfing Project Ara—are music to the ears of hobbyists and hackers who are always interested in taking fuller control of how ...

Why Volkswagen share price slump goes beyond market logic

September 25, 2015

It has been an extraordinary week for Volkswagen managers and investors alike as markets issued their punishment for the company's admission of emissions test cheating. Standard financial economics theory states that trading ...

VW CEO says he's 'endlessly sorry' for tarnishing brand

September 22, 2015

Volkswagen AG's emissions scandal crisis escalated Tuesday as the company issued a profit warning, set aside billions to cover the fallout and saw its shares take another battering. The CEO of the world's top-selling carmaker ...

Recommended for you

How much for that Nobel prize in the window?

October 3, 2015

No need to make peace in the Middle East, resolve one of science's great mysteries or pen a masterpiece: the easiest way to get yourself a Nobel prize may be to buy one.

Search for Egypt's Nefertiti gains new momentum (Update)

September 29, 2015

The search for ancient Egypt's Queen Nefertiti in an alleged hidden chamber in King Tut's tomb gained new momentum as Egypt's Antiquities Minister said Tuesday he is now more convinced a queen's tomb may lay hidden behind ...

New finds of a living fossil

October 2, 2015

The coelacanth fish, found today in the Indian Ocean, is often called a 'living fossil' because its last ancestors existed about 70 million years ago and it has survived into the present - but without leaving any fossil remains ...


Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.