Price fairness
| DOI | https://doi.org/10.1108/10610420810896103 |
| Date | 22 August 2008 |
| Published date | 22 August 2008 |
| Pages | 353-355 |
| Author | Herman Diller |
| Subject Matter | Marketing |
Pricing strategy & practice
Price fairness
Herman Diller
Universita
¨t Erlangen-Nu
¨rnberg, Nu
¨rnberg, Germany
Abstract
Purpose – The purpose of this article is to integrate the various strands of fair price research into a concise conceptual model.
Design/methodology/approach – The proposed price fairness model is based on a review of the fair pricing literature, incorporating research
reported in not only English but also German.
Findings – The proposed fair price model depicts seven components of a fair price: distributive fairness, consistent behaviour, personal respect and
regard for the partner, fair dealing, price honesty, price reliability, and influence/right of co-determination.
Practical implications – Since buyers’ purchase decisions are influenced by their subjective perception of price fairness, sellers need to understand
what constitutes a fair price.
Originality/value – This model provides a concise representation of the multi-dimensional concept of price fairness. It identifies aspects of a fair price
which have hitherto received little research; for example, the need for personal respect for the partner and the right of co-determination.
Keywords Prices, Research
Paper type Research paper
Until now, the topic of price fairness has received relatively
little scientific examination, apart from one fundamental
study by Kahneman et al. (1986), which approached the
problem from a prospect-theoretical point-of-view.
The problem has been studied for the most part from a
perception-theoretical approach (Thaler, 1985), sometimes
even from the equity-theoretical viewpoint (Maxwell, 1995),
but it is rarely examined with respect to attribution theory
(Campbell, 1999). The equity theory is especially applicable
here. According to it, the distribution of returns from a
common activity is considered fundamentally just and well-
balanced when all involved perceive the relation between their
own contributions and the returns they expect from their
participation in the project as (relatively) equal (cf. Mikula,
1980, p. 17; Schwinger, 1980, p. 109). A further extension of
the equity assessment is the so-called multiple principle
assessment (cf. Deutsch, 1975; Leventhal, 1976), which
provides various ways to evaluate an allocation of returns
based upon cooperatively gained yields.
The concept of distribution fairness (just distribution)
concerns the returns or the proportional allotment of a
distribution of resources or premiums already on hand.
Kahneman et al. (1986) use data from a wide variety of
questionnaires to demonstrate that people measure their sense
of fairness against a comparable referential situation, let’s say
the status quo, to which the participants are bound. If costs
increase, for example, the seller can pass the price increases
on if his/her profit margin remains the same (“profit
protection”). The exploitation of exogenously caused
conditions (price increases for snow removal following a
blizzard for example) is looked upon as unfair, even if it is in
conformity with the market. In such instances, the market
price mechanism is likely to be distrusted. That is not to say
that it is considered unfair, but rather as less fair than a cost
plus calculation. This type of cost-oriented price ethics is
widespread (cf. Wied-Nebbeling, 1985, p. 44ff). A price
change is considered more unfair if the seller is suspected of
“bad”, i.e. selfish motives than if “good” motives (job
retention, for example) are attributed to him (Campbell,
1999). If “windfall profits” (increases in market price against
a steady cost situation, for example) should accrue to a seller,
it is certainly not considered unfair to rake them in. Of course,
this does not hold true for progressive price increases on the
part of a seller. Moreover, “genuine” (out of pocket) losses on
the side of the purchaser (losses in the sense of the prospect
theory), or price increases for example, are perceived as a
more serious vitiation of price fairness than an equally large
revocation of opportunistic profits (the elimination of a bonus
program, for example).
The concept of just procedure (procedural fairness) looks at
the process underlying and leading to the eventual returns.
Fair dealings are consistent, unprejudiced and non-partisan;
they represent the interests of all partners, and are based upon
accurate and careful information as well as upon ethical
standards (cf. Leventhal et al., 1980, p. 223f). In cases of
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
17/5 (2008) 353–355
qEmerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610420810896103]
This model and text were published first in Diller, H.J. (2000), Preispolitik,
Kohlhammer et al., Stuttgart, pp. 183-8 (4th edition 2007). Reprinted
with permission of the author from Preispolitik, by Hermann Diller.
Translated by Susan Hecker Ray, Professor of German, Fordham
University.
353
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