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: Use your loaf to save British wildlife

Related Stories

Use your loaf to save British wildlife

November 18, 2015

Farmers can maintain high yields and boost nature by signing up to a wildlife-friendly scheme, new research published today in the Journal of Applied Ecology has found.

Airbnb promises to play fair with cities

November 11, 2015

Airbnb dialed down its battle rhetoric Wednesday, promising to pay taxes and not cut into long-term housing amid criticism it unfairly competes with hotels and has exacerbated a San Francisco housing crisis.

Recommended for you

Biologists trace how human innovation impacts tool evolution

November 24, 2015

Many animals exhibit learned behaviors, but humans are unique in their capacity to build on existing knowledge to make new innovations. Understanding the patterns of how new generations of tools emerged in prehistoric societies, ...

How experienced buyers can mitigate economic bubbles

November 19, 2015

(Phys.org)—Over the last decade, many people got a tough primer on the effects of economic bubbles, as the bursting of the 2007-2008 housing bubble sent shockwaves through most of the major world economies. But property ...

First Londoners were multi-ethnic mix: museum

November 23, 2015

A DNA analysis of four ancient Roman skeletons found in London shows the first inhabitants of the city were a multi-ethnic mix similar to contemporary Londoners, the Museum of London said on Monday.


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.