IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v15y2008i1p27-43.html
   My bibliography  Save this article

Do Consumers Care about how Prices are Set?

Author

Listed:
  • Pascal Courty
  • Mario Pagliero

Abstract

Using a survey approach, we ask consumers to reveal their preferences over pricing schemes that may differ in terms of the average price of consumption, the amount of price variation, and the probability of being rationed. We find that consumers dislike pricing schemes that vary prices more but that they are willing to trade off price variation and rationing. Surprisingly, they are not willing to trade off an increase in price variation for a decrease in expected prices. We discuss the implications of these findings for firm pricing policies.

Suggested Citation

  • Pascal Courty & Mario Pagliero, 2008. "Do Consumers Care about how Prices are Set?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(1), pages 27-43.
    • Handle: RePEc:taf:ijecbs:v:15:y:2008:i:1:p:27-43
    DOI: 10.1080/13571510701830457
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/10.1080/13571510701830457
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13571510701830457?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Julio J. Rotemberg, 2011. "Fair Pricing," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 952-981, October.
    2. Mark J. Zbaracki & Mark Ritson & Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Managerial and Customer Costs of Price Adjustment: Direct Evidence from Industrial Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 514-533, May.
    3. Frederick V. Waugh, 1972. "A Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(3), pages 499-499.
    4. Walter Y. Oi, 1972. "The Consumer Does Benefit from Feasible Price Stability: A Comment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(3), pages 494-498.
    5. R. L. Hall & C. J. Hitch, 1939. "Price Theory And Business Behaviour," Oxford Economic Papers, Oxford University Press, vol. 0(1), pages 12-45.
    6. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-683, August.
    7. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    8. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-741, September.
    9. William Vickrey, 1971. "Responsive Pricing of Public Utility Services," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 337-346, Spring.
    10. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-658, September.
    11. Piron, Robert & Fernandez, Luis, 1995. "Are fairness constraints on profit-seeking important?," Journal of Economic Psychology, Elsevier, vol. 16(1), pages 73-96, March.
    12. Frey, Bruno S. & Pommerehne, Werner W., 1993. "On the fairness of pricing -- An empirical survey among the general population," Journal of Economic Behavior & Organization, Elsevier, vol. 20(3), pages 295-307, April.
    13. Dickson, Peter R. & Kalapurakal, Rosemary, 1994. "The use and perceived fairness of price-setting rules in the bulk electricity market," Journal of Economic Psychology, Elsevier, vol. 15(3), pages 427-448, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dertwinkel-Kalt, Markus & Köster, Mats, 2020. "Attention to online sales: The role of brand image concerns," DICE Discussion Papers 335, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Courty, Pascal & Pagliero, Mario, 2010. "Price variation antagonism and firm pricing policies," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 235-249, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Courty, Pascal & Pagliero, Mario, 2010. "Price variation antagonism and firm pricing policies," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 235-249, August.
    2. Huang, Jen-Hung & Chang, Ching-Te & Chen, Cathy Yi-Hsuan, 2005. "Perceived fairness of pricing on the Internet," Journal of Economic Psychology, Elsevier, vol. 26(3), pages 343-361, June.
    3. Andreas Leibbrandt, 2016. "Behavioral Constraints on Pricing: Experimental Evidence on Price Discrimination and Customer Antagonism," CESifo Working Paper Series 6214, CESifo.
    4. Lindsey, Robin, 2011. "State-dependent congestion pricing with reference-dependent preferences," Transportation Research Part B: Methodological, Elsevier, vol. 45(10), pages 1501-1526.
    5. 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.
    6. Luini, Luigi & Sabbatini, Pierluigi, 2012. "Demand cross elasticity without substitutability: An experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 255-265.
    7. Julio J. Rotemberg, 2011. "Fair Pricing," Journal of the European Economic Association, European Economic Association, vol. 9(5), pages 952-981, October.
    8. Schein, Andrew, 2002. "Concern for fair prices in the Israeli housing market," Journal of Economic Psychology, Elsevier, vol. 23(2), pages 213-230, April.
    9. Seligman, David A. & Schwartz, Barry, 1997. "Domain specificity of fairness judgments in economic transactions," Journal of Economic Psychology, Elsevier, vol. 18(6), pages 579-604, November.
    10. Claudia Kwapil & Johann Scharler & Josef Baumgartner, 2010. "How are prices adjusted in response to shocks? Survey evidence from Austrian firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(2-3), pages 151-160.
    11. Louis Lévy-Garboua & Claude Montmarquette, 1996. "Cognition In Seemingly Riskless Choices And Judgments," Rationality and Society, , vol. 8(2), pages 167-185, May.
    12. Levy, Daniel & Snir, Avichai & Gotler, Alex & Chen, Haipeng (Allan), 2020. "Not all price endings are created equal: Price points and asymmetric price rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    13. Young, Andrew T. & Levy, Daniel, 2014. "Explicit Evidence of an Implicit Contract," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 30(4), pages 804-832.
    14. van der Heijden, Eline C. M. & Nelissen, Jan H. M. & Verbon, Harrie A. A., 1997. "Altruism and fairness in a public pension system," Journal of Economic Behavior & Organization, Elsevier, vol. 32(4), pages 505-518, April.
    15. Bruno S. Frey & David A. Savage & Benno Torgler, 2011. "Behavior under Extreme Conditions: The Titanic Disaster," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 209-222, Winter.
    16. Konow, James, 1996. "A positive theory of economic fairness," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 13-35, October.
    17. Pascal Courty & Mario Pagliero, 2011. "Does responsive pricing smooth demand shocks?," Applied Economics, Taylor & Francis Journals, vol. 43(30), pages 4707-4721.
    18. Chen, Haipeng (Allan) & Levy, Daniel & Ray, Sourav & Bergen, Mark, 2008. "Asymmetric Price Adjustment in the Small," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 55(4), pages 728-737.
    19. Hatime Kamilcelebi, 2019. "Framing Effect and Decision-Making in the Market: A Research on Profit-Seeking and Religiousness in Turkey," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 9(7), pages 417-425, July.
    20. repec:cup:judgdm:v:4:y:2009:i:3:p:214-226 is not listed on IDEAS
    21. Sojin Jung & Hyeon Jeong Cho & Byoungho Ellie Jin, 2020. "Does effective cost transparency increase price fairness? An analysis of apparel brand strategies," Journal of Brand Management, Palgrave Macmillan, vol. 27(5), pages 495-507, September.

    More about this item

    Keywords

    Consumer Demand; Rationing; Demand Fluctuation; Antagonism; Fairness;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:15:y:2008:i:1:p:27-43. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.