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The Price Is Unfair! A Conceptual Framework of Price Fairness Perceptions

This document presents a conceptual framework for understanding price fairness perceptions. It discusses factors that influence perceptions of unfair pricing such as transaction similarity, cost structures, relationships and trust, social norms, and attributions of inequality. When customers perceive unfair pricing, it can decrease perceived value and elicit negative emotions. This may lead to behaviors like complaining, switching brands, or seeking compensation. Managers can help mitigate unfairness perceptions by decreasing transaction similarity, providing pricing information, managing customer relationships, and responding to complaints.

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CHINTAN NARENDRASINH ATODARIA PGP Mumbai 2017-19
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103 views3 pages

The Price Is Unfair! A Conceptual Framework of Price Fairness Perceptions

This document presents a conceptual framework for understanding price fairness perceptions. It discusses factors that influence perceptions of unfair pricing such as transaction similarity, cost structures, relationships and trust, social norms, and attributions of inequality. When customers perceive unfair pricing, it can decrease perceived value and elicit negative emotions. This may lead to behaviors like complaining, switching brands, or seeking compensation. Managers can help mitigate unfairness perceptions by decreasing transaction similarity, providing pricing information, managing customer relationships, and responding to complaints.

Uploaded by

CHINTAN NARENDRASINH ATODARIA PGP Mumbai 2017-19
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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The Price Is Unfair!

A Conceptual Framework of Price Fairness Perceptions


Because of increasing public concern, it seems appropriate to explore further the theoretical
bases and empirical findings to clarify what is known about the causes of perceived price
unfairness and how the perceptions influence customers’ behaviours. Various
conceptualizations have been developed and adapted to explain the phenomenon of fairness.
However, each approach tends to address a specific reason for price fairness. Development
of a conceptual framework for price fairness that integrates the conceptualizations and
organizes existing price fairness research.
 Conceptual Framework of Price Fairness

 The concept of Price Fairness


Fairness has been defined as a judgment of whether an outcome and/or the process to reach
an outcome are reasonable, acceptable, or just. Price fairness judgments involve a
comparison of a price or procedure with a pertinent standard, reference, or norm. Certain
clarification before developing model -:
1. Fairness and unfairness may be conceptually different constructs. It is possible to be
clear about one without having clarity about the other.
2. all price evaluations, including fairness assessments, are comparative. Both equity
theory and the theory of distributive justice suggest that perceptions of fairness are
induced when a person compares an outcome.
Price comparisons lead consumers to one of three types of judgments: equality,
advantaged inequality, or disadvantaged inequality.
3. A price fairness judgment is subjective and usually is studied from the buyer’s
perspective.
4. Affect is an important element that accompanies the cognition of price equality or
inequality. A buyer may have feelings of unease or guilt when the inequality is to his
or her advantage but feelings of anger or outrage when the inequality is to his or her
disadvantage.
5. An unfairness perception and potential negative emotions usually are directed toward
the party that is perceived as having caused the “unfair” situation. For price
unfairness, the target of the perception and the emotions is usually the seller. Thus,
the actions that buyers take when they perceive that prices are unfair are usually
directed toward the seller rather than toward a comparative other buyer or the
product involved in the transaction.
 Factors That influence unfairness Price Perception
The factors are divided into four groups-:
1. The variables that specify the context of the comparative transactions. These include
price comparison (implicit or explicit), seller and buyers input and output ratios
(comparative transaction of both parties), similarity between different type of
transaction and the comparative parties involved in transaction.
2. It includes procedures or processes that lead to the observed prices. The type of cost
and whether sellers have control over the costs may influence the degree of perceived
unfairness.
3. Consumers may consider more than a particular transaction and make inferences
based on their previous experiences.
4. Consumers may also rely on their general knowledge or beliefs about sellers’ practices
to adjust their judgments of price fairness.
Apart from these factors, certain other factors are considered which influence unfairness-:

 Transaction similarity and choice of comparative other parties


o Transaction involves exchange of given product at a given place for agreed
upon value in between atleast 2 parties. Transaction may occur at different
times
o Product of same type be sold from different locations
o Product maybe of same type but from different brand
o Social characteristics of parties involved
o Bias based on which transaction is done
o When degree of similarity is low between transaction, it leads to price variation
and based on which customer will perceive it as fair or unfair.
 The cost-profit distribution and attribution for the inequality
o Seller’s cost vital in setting of prices
o Increased prices due to higher demand – unfair pricing
 Buyer seller relationship and trust
o Repeated transaction enable customer to gain more information on trust
worthiness of seller
o Previous transaction experiences to evaluate the transaction with new seller
 Social norms and metaknowledge of market place
o General knowledge about the market
o Information available to gain more knowledge about their buying experience
 Effect of Buyer’s Unfairness Perception
 Perceived Value - An important mediating variable of buyers’ purchase intentions is
their perceptions of the value of the seller’s offering. Buyers’ perceptions of value are
mental trade-offs of what they believe they gain from a purchase with what they
sacrifice by paying the price. Assuming that there is no perceived difference in quality
or benefits received from the product or service, this reduction in perceived value
must result from an increase in perceptions of monetary sacrifice. Buyer tend to focus
on monetary sacrifice of price, higher perceived price unfairness increases perceptions
of monetary sacrifice
 Negative emotions – Unfair pricing leads to dissatisfaction which gives a negative
experience to customer which can be anger, complaints or etc. This may lead to
switching of products.

 Buyers’ Behavioural reaction


In case of unfair pricing perceived by customer buyer tries to produce a negative
consequence to firm like lowering of price, complaints, negative word of mouth,
monetary compensation etc. For different situation customer acts differently like-
 No Action – No influence of unfairness on transaction with seller
 Self-protection – When buyer believes that inequality is unacceptable and seek
to compensate for loss
 Revenge – When leaving the relationship is not enough

 Implication for Pricing manager


 Decrease Transactional similarity
 Anticipate Reactions to Price Differences and Provide Relevant Information
 Manage Customer Relationships
 Damage Control When Perceptions of Unfairness Arise

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