—Does Demand Fall When Customers Perceive That Prices Are Unfair? The Case of Premium Pricing for Large Sizes

Eric T. Anderson () and Duncan I. Simester ()
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Eric T. Anderson: Kellogg School of Management, Northwestern University, Evanston, Illinois 60208
Duncan I. Simester: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142

Marketing Science, 2008, vol. 27, issue 3, 492-500

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 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:27:y:2008:i:3:p:492-500

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