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he issue of price fairness has become newsworthy as 1975). In this article, we present a conceptual framework
Journal of Marketing
Vol. 68 (October 2004), 115 Price Fairness Perceptions / 1
FIGURE 1
A Conceptual Framework of Price Fairness
Actions
No action/influence
Perceived price Perceived value Self-protection (e.g.,
Price fairness Negative emotions withdraw from a purchase,
comparison Cognitive get a refund, complain)
Affective P5P6 Revenge (e.g., word of
mouth, legal actions)
P7P9
Transaction similarity
and choice of
comparison party Perceived cost of
Knowledge, beliefs, and social action and relative
P1P2 norms power
The principle of distributive justice maintains that people, inequality may lead to a judgment either that the price is
in an exchange relationship with others, are entitled to less fair than the equal prices situation or that it is unfair.
receive a reward that is proportional to what they have Third, a price fairness judgment is subjective and usu-
invested in the relationship (Homans 1961). Equity theory ally is studied from the buyers perspective. Therefore, the
broadens this perspective to include various comparative judgment tends to be biased by the buyers self-interest; that
others that may influence the perceived fairness of an is, the buyer tries to maximize his or her own outcome (i.e.,
exchange relationship (Adams 1965). A reference other tries to pay a lower price) compared with that of the other
may be another person, a class of people, an organization, party (Oliver and Swan 1989a). Thus, the judgment and
or the individual himself relative to his experiences from an feelings associated with advantaged and disadvantaged
earlier point in time (Jacoby 1976, p. 1053). Indeed, social price inequality are different. Consequently, perceived
comparison processes are central to most theories of justice unfairness is less severe when the inequality is to the
and outcome satisfaction (Major and Testa 1989). In the buyers advantage than when it is to the buyers disadvan-
context of price fairness, the outcomes to be compared are tage. That is, for an equivalent magnitude of price inequal-
prices. When the price being judged differs from the price ity, we expect to observe a smaller degree of perceived
in the reference transaction, the price difference may induce unfairness when the inequality is to the buyers advantage
an unfairness perception. Such a price comparison is a nec- than when it is to the buyers disadvantage (Ordez, Con-
essary but not sufficient condition for price unfairness per- nolly, and Coughlan 2000). Indeed, Martins (1995) finds
ceptions to occur. that the perceived fairness effect of a comparable other
It should be noted that price comparisons can be explicit buyer paying less is stronger than when the comparable
as well as implicit. In explicit comparisons, people compare other pays more.
one price with another price or with a range of prices. For Fourth, previous research has concentrated on the cog-
example, a consumer may claim, I paid more than another nitive aspect of unfairness perceptions. We propose that
customer did, which is a comparison between two price affect is an important element that accompanies the cogni-
points, or I paid more than I used to, which is a compari- tion of price equality or inequality. A buyer may have feel-
son between a price point and a price range. However, the ings of unease or guilt when the inequality is to his or her
comparison may not necessarily be explicitly stated. For advantage but feelings of anger or outrage when the
example, senior citizens may claim that a price is unfair. inequality is to his or her disadvantage. These emotions
Although this judgment seems to be based on a single price, may occur concurrently with the unfair cognitions, or
it nevertheless is an implicit comparison to an unspecified arguably they may even precede such cognitions (Campbell
but expected lower price that they believe they are entitled 2004). Severe unfairness perceptions typically come with
to because of their limited fixed income. heat and passion, anger, and outrage; and they insistently
Price comparisons lead consumers to one of three types press for action or redress (Finkel 2001, p. 57). This strong
of judgments: equality, advantaged inequality, or disadvan- negative emotion is an element that distinguishes unfairness
taged inequality. A perception of price equality normally either from fairness or from less fairness. In this article, we
does not trigger a fairness perception, or if one is triggered, add affect as an important element of price fairness
it may lead to perceived fairness. A perception of price perceptions.
APPENDIX
Summary of Research Relevant to Price Fairness
Bolton, Warlop, and Fairness judgments Tests reactions to Historical prices; People do not have
Alba (2003) may be based on perceived differences store-price image; accurate mental cost
previous prices, of historical prices, store strategies, risks, or profit models for
competitor prices, and relation between and costs; and firms.
profits; attributions store-price levels, perceived price Increases in some
depend on the expected profits, fairness. firm (fair) costs lead
difference between perceived firm costs, to increased
reference point and and profit sources. perceived fairness;
price. some costs are unfair
for price increases.
Price differences are
fairest when
attributed to quality
differences.
Campbell (1999) Inferred motive and a Tests consumer Firms reputation, Relative profit and
firms reputation affect reactions to retail inferred motive, inferred motive
perceptions of price purchasing scenarios; inferred profit, influence fairness
fairness and future presents variations in perceived fairness, perceptions, which in
shopping intentions. the sellers intent and and shopping turn affect shopping
reputation. intentions. intentions.
A firms reputation
moderates inferences
of motive.
Collie, Bradley, and When outcomes of Tests scenarios in Knowledge of others Subjects who did not
Sparks (2002) others are unknown, which subjects paid outcomes, outcome know others
judgments vary with more, less, or equal to fairness, and outcomes rated their
procedural fairness, comparable others satisfaction with outcomes as more
but not when others and did or did not interaction. fair.
outcomes are known. know others prices. It is difficult to judge
distributive fairness
because of ambiguity
of why the outcomes
occurred.
Darke and Dahl Greater satisfaction Tests scenarios in Bargain size, loyalty Perceived fairness
(2003) occurs when the which subjects status of comparative mediates the bargain
outcome/input ratio of received smaller or other, satisfaction, and sizesatisfaction
a comparative other is equal discounts perceived fairness. relationship.
equivalent. Perceptions of
fairness enhance the
value of a bargain.
Dickson and Perceived fairness of Surveys traders of Frequency of rule use, Rules that treat cost
Kalapurakal (1994) a price depends on bulk electricity to fairness of rules, and increases and
the rule used to set determine use of and response to perceived decreases
price. perceived fairness of unfair prices. symmetrically are fair.
four cost-based Price increases due
pricing rules and four to demand increases
market-based rules. are unfair. The more
frequently a rule
occurs, the fairer the
rule is perceived.
Frey and Consumers evaluate Surveys consumers to Fairness judgments Perceived price
Pommerehne (1993) fairness by starting determine and acceptability of fairness for a price
from a fair or just acceptability of allocation alternatives. increase with excess
price. rationing excess demand is higher
demand. when supply may
expand.
Increasing price to
profit from demand is
unfair.
Huppertz, Arenson, When consumers Tests consumer Price inequity, service Price inequity may
and Evans (1978) perceive certain judgments of fairness inequity, shopping dominate service
factors in a of hypothetical retail frequency, item cost, inequity in consumer
relationship as exchange situations. and behavioral buying situations.
inequitable, they seek response. Buyers are more apt
inequity reduction. to complain when
price inequity is high.
Frequent buyers are
more likely to
perceive inequity in a
relationship.
Kahneman, Knetsch, Dual entitlement: Surveys consumers to Fairness judgments It is fair for a firm to
and Thaler (1986a) Fairness determine standards when presented with raise prices when
considerations of fairness applicable reference transaction, faced with increasing
constrain profit- to price setting and to outcomes of the seller costs.
maximizing firms. understand the effects and buyer and the It is fair for a firm to
of fairness rules on reason behind the maintain prices as
market outcomes. changes. costs decline.
It is unfair for a firm
to benefit from shifts
in demand by raising
prices.
Kalapurakal, Dickson, Fairness of the dual Conducts experiment Perceived fairness of Absorbing cost
and Urbany (1991) entitlement principle is with students using the pricing rule. increases and
subject to context three pricing rules decreases and using
effects and is not as over four context cost-plus pricing is
general as previously scenarios. more fair than the
believed. dual entitlement rule.
Fairness perceptions
are influenced by
information about the
sellers costs,
margins, profits, and
pricing behavior.
Kimes (1994) Yield management Surveys hotel visitors Fairness judgments, Yield management
practices often to gauge their role of information, practices would be
encounter perceptions reactions to and role of restrictions and perceived fair if:
of unfairness. perceptions of fairness benefits, and Information on
when presented with perceived differences. varying pricing
different scenarios. options is available;
Substantial discounts
are given along with
reasonable
restrictions; and
Products perceived
as different have
different prices.
Martins (1995) Buyers may compare Manipulates price paid Perceived monetary Presence of a price
prices with by reference other, sacrifice and discrepancy is
comparable other reference other perceived price perceived as unfair.
buyers; perceptions of income, and product fairness. Perceived monetary
price fairness are type. sacrifice is
affected by significantly less
discrepancies. when reference
others pay more and
significantly more
when reference
others pay less.
Maxwell (1995) Fairness judgments Asks consumers to Price fairness. Both economical and
depend on economic cite cases of fair and social components
and social variables. unfair pricing. affect determinations
of price fairness.
Maxwell (1999) Social norms are Tests consumers Social norms and A classification
important in long- and reactions to questions personal and societal system and proposed
short-term exchange conveying selected approval. method of quantifying
relationships. firms pricing. social norms enables
further study of the
effects of social
norms on consumer
transactions.
Maxwell (2002) If price equals Tests fairness Perceived fair price, Adherence to social
reference price, judgments using two attitude toward seller, norms for pricing
buyers infer levels of reference and willingness to procedures forms a
procedural price price, seller power, purchase. basis for fairness
fairness; if not, levels of justification, judgments.
consumers have less and three levels of Judged fairness of
intention to buy. price procedures. pricing practices
influences attitudes
toward the seller and
willingness to buy.
Maxwell, Nye, and Self-interest and Examines the fairness Fair prices, acceptable Priming buyers to
Maxwell (1999) social utility can exist and acceptability of prices, and effects of consider fairness
simultaneously when prices before priming. enables sellers to
buyers have been negotiation by priming increase buyer
primed for fairness fairness in bargaining satisfaction without
considerations. scenarios. sacrificing profit.
Fairness-primed
buyers demonstrate
more cooperative
behavior.
Oliver and Swan Fairness perceptions Surveys automobile Buyers and sellers An exchange is fair if
(1989a) in an exchange result purchasers inputs and outcomes, the buyers outcomes
from not only equity perceptions of fairness fairness, intention, and sellers inputs
dimensions but also and satisfaction in an satisfaction, and are high.
satisfaction. exchange situation. disconfirmation. Intention is influenced
by satisfaction, and
satisfaction is
explained by fairness
perceptions.
Oliver and Swan Consumers compare Surveys automobile Buyers, Consumers
(1989b) inputs and outcomes purchasers, dealers, salespeoples, and perceptions of
of other parties with and salespeoples dealers inputs; fairness are stronger
their own on the basis perceptions of outcomes; fairness; when their
of role expectations. fairness, satisfaction, disconfirmation; and outcomeinput
Fair price is implicit in preference, and satisfaction. scores exceed the
this comparison. disconfirmation. merchants.
Fairness is highly
related to satisfaction.
Ordez, Connolly, When making fairness Tests satisfaction and Satisfaction and Both advantageous
and Coughlan and satisfaction fairness judgments fairness. and disadvantageous
(2000) judgments, consumers when individuals inequity is unfair; the
use multiple reference compared hypothetical latter is judged as
points. salaries offered to more unfair.
MBA graduates. Satisfaction and
fairness are distinct
from each other.
Sinha and Batra Consumers are more Surveys 404 shoppers Perceived risk, price Strong positive effect
(1999) price conscious when about eight grocery versus perceived of perceived price
they perceive price products and uses quality, price unfairness of national
unfairness by national rating scales. consciousness, and brands on price
brands; such price perceived price consciousness.
unfairness leads to unfairness. Perceived price
purchases of private unfairness has
brands. indirect effect on
choice through price
consciousness.
Nonsignificant
relationship between
price quality and
price unfairness.
Urbany, Madden, and ATM fee with cost Surveys 40 adults with Perceived fairness, Confirm dual
Dickson (1989) justification is more scenario that depicts a behavioral intentions, entitlement: Cost-
fair than without bank implementing a and switching costs. justified fee is
justification; switching new ATM fee. perceived as more
costs inhibit intent to fair.
leave bank. Fairness perceptions
may not predict
behavioral intentions.
Vaidyanathan and Inferred causes of Tests fairness Internal versus A price increase
Aggrarwal (2003) price increases affect judgments with external causes of caused by external
perceptions of price scenarios that provide price change, factors and not under
fairness. reasons for price controllability, and the control of the
increases. perceived fairness. seller is perceived as
fair.
A cost-justified price
increase is not
necessarily judged as
fair.
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