Comparing the incomparable? How consumers judge the price fairness of new products

Abstract

The present article explores price fairness perceptions in the specific setting of new product launch prices. In this context, the process of forming price fairness judgments by comparing the price to be judged with the price in a reference transaction is thwarted by the fact that reference transactions are not readily available. Following the conceptual logic on the development of price fairness judgments, results from three experimental consumer studies reveal that price fairness is the key link between launch price and adoption intention but that this relationship is moderated by transaction similarity and social norms. More specifically, transaction similarity, captured by the degree of product newness and future expected price change, determines the comparators consumers will use in their evaluative effort and mitigates the negative launch price-perceived price fairness relationship. In consequence, consumers use existing products to judge prices of incrementally new products. Given the reduced similarity of reference transactions for really new products, consumers rather rely on future prices in their price fairness judgments providing evidence for consumers' forward-looking evaluation. The present study captures social norms by the concept of consumer innovativeness and results demonstrate that due to the inherent uncertainty of really new products, consumer innovativeness influences the extent to which individuals engage in price comparisons when judging the fairness of launch prices of these products. The authors conclude by deriving implications for the price setting of new products.