Pricing Fairness in a Pandemic: Navigating Unintended Changes to Value or Cost

Abstract

The recent pandemic has caused many businesses to alter their offerings, at times providing inferior value to their customers or incurring higher costs. Many classes moved online, leading to a lower-value offering without significant cost reductions, and many firms adopted costly hygiene measures, such as stringent cleaning or reducing capacity to maintain social distancing. This article explores consumers’ fairness perceptions regarding pricing decisions made in response to unique scenarios caused by the pandemic. We present three key findings: (i) maintaining prices following a product downgrade is viewed as less fair than maintaining prices following an equivalent decrease in costs; (ii) price decreases following a product downgrade are viewed as more fair when positioned as passing on a cost saving rather than making up for decreased value; and (iii) price increases due to hygiene measures are perceived as more fair when they result from direct (compared with indirect) cost changes.