Abstract
The present study investigated perceived price fairness (PPF) and aimed to reveal determinants of PPF within the participative pricing mechanism paywhat-you-want (PWYW). Results support the hypothesis that PPF in PWYW conditions is higher than PPF in ordinary price setting (OPS) conditions. Determinants of PPF in PWYW conditions were identified to include both the price level and the degree of social interaction. Whereas the results conform to previous research that PPF correlates negatively with the price level in OPS conditions, this study reveals a positive correlation between the price level and PPF in PWYW conditions, which suggests that the buyer’s mental model of PPF varies with the process of price determination. Therefore, future research should re-examine consequences of PPF in PWYW conditions. Additionally, results show cross-country differences of PPF and the influence of the price level on PPF.
Highlights
The price of a product or service significantly influences customers’ perception and behaviour, and pricing is a challenging but important managerial decision to make [1]
Whereas the results conform to previous research that perceived price fairness (PPF) correlates negatively with the price level in ordinary price setting (OPS) conditions, this study reveals a positive correlation between the price level and PPF in PWYW conditions, which suggests that the buyer’s mental model of PPF varies with the process of price determination
It was hypothesized that PPF in a PWYW situation is significantly higher than PPF in an OPS situation
Summary
The price of a product or service significantly influences customers’ perception and behaviour, and pricing is a challenging but important managerial decision to make [1]. In 2000, online retailer Amazon tried to implement a pricing strategy where new and existing customers were being shown different prices. Amazon assumed that existing customers had lower price sensitivity than new customers and . J. Bettray et al 712 offered identical products at higher prices for existing customers. The price gap led to massive protests from existing customers, because they felt they were treated unequally. Amazon closed the price gap, paid the price difference of higher paid prices back, and suffered from reputational damage in the aftermath [4] [5] [6]
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