The effects of price framing and magnitude of price differences on perceived fairness when switching from static to variable pricing

Abstract

The long-term success of variable pricing relies on existing and new customers accepting the pricing scheme implemented. We use experimental data from the alpine skiing industry to examine how the magnitude of price differences and price framing affect perceived fairness in cases of intra-weekly price differentiations and early-bird discounts. The results show that both the price framing and the magnitude of the price differences between the high- and low-price scenarios have strong effects on perceived fairness. Framing the price difference as either a loss or a gain has an asymmetrical effect on perceived fairness. Increasing the price difference between the high- and low-price alternatives has a negative impact on perceived fairness, but the effect differs across framing (gain or loss) and for various early-bird horizons.