The dark side of surge pricing and the mitigating role of information disclosure

Abstract

ABSTRACT This research paper investigates the impact of surge pricing, a dynamic pricing strategy that adjusts prices based on real-time demand and supply, on customers’ perception of price fairness. We aim to provide insights for both academic and managerial audiences. Our study focuses on how businesses using surge pricing can minimize negative effects on customer behavior by properly communicating price changes. We conducted two experiments to examine customers’ fairness perception of surge pricing policies. Our findings revealed that customers generally perceive surge pricing as less fair. However, we also discovered that aligning the amount of information shared with the price increase can effectively improve these fairness perceptions. Our research contributes to the literature on price communication by exploring factors that influence consumers’ understanding and acceptance of price changes. Additionally, our findings offer practical guidance for businesses on how to communicate pricing information in a way that customers perceive as fair, ultimately benefiting both companies and their customers.