Does Demand Fall When Customers Perceive That Prices Are Unfair? The Case of Premium Pricing for Large Sizes

Authors
Anderson, Eric T. Simester, Duncan I.
Citation
T. Anderson, Eric et I. Simester, Duncan, Does Demand Fall When Customers Perceive That Prices Are Unfair? The Case of Premium Pricing for Large Sizes, Marketing science , 27(3), 2008, pp. 492-500
Journal title
Marketing science → ACNP
ISSN journal
07322399
Volume
27
Issue
3
Year of publication
2008
Pages
492 - 500
Database
ACNP
SICI code
Abstract
We analyze a large-scale field test conducted with a mail-order catalog firm to investigate how customers react to premium prices for larger sizes of women's apparel. We find that customers who demand large sizes react unfavorably to paying a higher price than customers for small sizes. Further investigation suggests that these consumers perceive that the price premium is unfair. Overall, premium pricing led to a 6% to 8% decrease in gross profits.