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A note on fairness and personalised pricing

Author

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  • Vulkan, Nir
  • Shem-Tov, Yotam

Abstract

Since the seminal papers of Fehr and Schmidt (1999) and Bolton and Ockenfels (2000), fairness has become an important discussion point in economics. Is it unfair that different people pay different prices for the same good or service? We provide what we believe to be a novel approach: We let normal everyday consumers play the role of sellers who have access to consumers’ data (and willingness to pay). A strong finding of behaviour in this setup is that subjects charge a fixed percentage (approximately 64%) of the willingness to pay from each of their subjects, leading to a fair, whilst uneven, distribution of prices. Interesting, this 64% price level does not change when we vary the number of sellers competing in the market.

Suggested Citation

  • Vulkan, Nir & Shem-Tov, Yotam, 2015. "A note on fairness and personalised pricing," Economics Letters, Elsevier, vol. 136(C), pages 179-183.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:179-183
    DOI: 10.1016/j.econlet.2015.09.012
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    References listed on IDEAS

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    Cited by:

    1. Hendrik Sonnabend, 2016. "Fairness constraints on profit-seeking: evidence from the German club concert industry," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 40(4), pages 529-545, November.
    2. Kalyanaram, Gurumurthy & Winer, Russell S., 2022. "Behavioral response to price: Data-based insights and future research for retailing," Journal of Retailing, Elsevier, vol. 98(1), pages 46-70.
    3. Haucap, Justus, 2018. "Big Data aus wettbewerbs- und ordnungspolitischer Perspektive," DICE Ordnungspolitische Perspektiven 96, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Haucap, Justus & Heimeshoff, Ulrich, 2017. "Ordnungspolitik in der digitalen Welt," DICE Ordnungspolitische Perspektiven 90, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    Market design; Pricing; Fair Pricing;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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