The Two Components of a Fair Price: Social and Personal

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Pricing strategy & practice The two components of a fair price: social and personal Sarah Maxwell Fordham University, New York, New York, USA Lucette Comer Purdue University, West Lafayette, Indiana, USA Abstract Purpose – The purpose of this paper is to isolate the effects of personal fairness (the consumer’s evauation of the magnitude of the price) and the social fairness (the acceptability of the price given the social norms of the society). Design/methodology/approach – This research adapted the scenarios used in the pivotal fair pricing study conducted by Kahneman, Knetsch and Thaler. To demonstrate the difference between their results and the results when personal and social fairness were separated, the analysis replicated that of Kahneman, Knetsch and Thaler. Findings – The paper finds that an individual’s self-serving concern for a personally fair price is moderated by their other-serving concern for a socially fair price. Research limitations/implications – This research demonstrates that there is a significant difference in the personal and social fairness of price, whether it is a price for goods, wages or rents. Practical implications – Sellers, employers and realtors can benefit from the knowledge that providing a socially acceptable reason for the increase of a product or rental price or the decrease of a wage can increase the likelihood that the recipients will judge the price increase as being fair. Originality/value – Prior research into price fairness has confused the two aspects of a fair price. By isolating the two separate components, we clarify how individuals perceive price fairness in the personal sense and how that perception is altered by a concern for fairness in the social sense. Keywords Pricing, Consumers, Rents, Pay Paper type Research paper Introduction Price fairness is of growing interest to marketing researchers (e.g.

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