Consumers' expenditures and perceived price fairness

Purpose - To analyze the role of price fairness perceptions as a construct underlying individuals' transactions. Design/methodology/approach - The paper formulates and empirically tests the hypothesis that price fairness perceptions endogenously determine consumers' expenditures decisions. Economic transactions are viewed as an allocation choice problem with fairness perceptions being an endogenous variable determining problem outcome. A treatment effects model is utilized, allowing for the analysis of the effects that price fairness perceptions exercise upon both the consumers' decision to realize a transaction as well as upon their consequent level of spending. Findings - Consumers do patronize stores and one important variable determining their level of spending is their perceptions of fairness underlying the transaction with a specific provider. Research limitations/implications - The small usable questionnaire sample may be considered as a limitation. However, the very satisfactory fit of the estimated model allows for the results to be a comparison basis with future findings. Practical implications - Analysis of price fairness perceptions provides new insights regarding consumer behavior, enhancing the analytical validity of typical household demand models. Originality/value - Analysis allows for price fairness perceptions to enter a consumer's expenditures equation usually expressed in terms of socio‐economic indicators.