October 20, 2006
What Is A Fair Price?
I know a lot of us view the gyrations of the price of a gallon of gas with a mixture of suspicion and alarm -- and yes, a feeling of unfairness. Researchers from the University of South Carolina examined the perception of fairness and dynamic pricing and came to an unstartling understanding:
Consumers have higher fairness perceptions and satisfaction regardless of the price level when they play a role in the price setting process rather than when prices are set by the retailer," the researchers explain. Additionally, "consumers view price changes within very short time periods as more unfair than changes over a more extended time period."
Additionally, people find it unfair to pay a different price than others (I'm thinking airlines here). But do these factors really determine a "fair" price, or just the perception of one? Clearly, these are factors you can look at when you don't have visibility into the real factors that go into price, i.e. supply and demand. Posted by Kevin Murphy at October 20, 2006 11:57 AM | Economics
