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: Investigating the financial burden of cancer drugs on Medicare patients

Related Stories

Facing ruin, India's ancient glass artists blame the Taj

June 25, 2017

Hanuman Prasad Garg doesn't blame rising fuel prices or pressure from cheap knock-offs for the slow demise of the glass industry where Indian artisans have forged bangles for centuries. He blames the Taj Mahal.

Security mistakes prompt changes to Georgia election system

July 14, 2017

Georgia's top elections official announced Friday that his office plans to take over managing the state's elections technology after major security mistakes were discovered at the center that has done the work for 15 years.

Recommended for you

Bringing a 'trust but verify' model to journal peer review

July 21, 2017

Academic journals are increasingly asking authors to use transparent reporting practices to "trust, but verify" that outcomes are not being reported in a biased way and to enable other researchers to reproduce the results. ...

Tyrannosaurus rex couldn't run, says new research

July 18, 2017

It is a classic chase scene in modern cinematic history. The image of a rampant Tyrannosaurus rex (T. rex) chasing Jeff Goldblum as he sits injured in the back of a 4x4 vehicle in Stephen Spielberg's original film adaptation ...

0 comments

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.