Research Note—Does Demand Fall When Customers Perceive That Prices Are Unfair? The Case of Premium Pricing for Large Sizes
Eric T. Anderson, Duncan I. Simester
Marketing Science · 2008 · Volume 27 · Issue 3
Abstract
We analyze a large-scale field test conducted with a mail-order catalog firm to investigate how customers react to premium prices for larger sizes of women's apparel. We find that customers who demand large sizes react unfavorably to paying a higher price than customers for small sizes. Further investigation suggests that these consumers perceive that the price premium is unfair. Overall, premium pricing led to a 6% to 8% decrease in gross profits.
Keywords
product line pricing, price discrimination, fairness, price promotion, experimental economics
Enable JavaScript for citation tools and additional paper interactions.