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

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Listed:
  • Eric T. Anderson

    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60208)

  • Duncan I. Simester

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

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.

Suggested Citation

  • Eric T. Anderson & Duncan I. Simester, 2008. "—Does Demand Fall When Customers Perceive That Prices Are Unfair? The Case of Premium Pricing for Large Sizes," Marketing Science, INFORMS, vol. 27(3), pages 492-500, 05-06.
    • Handle: RePEc:inm:ormksc:v:27:y:2008:i:3:p:492-500
    DOI: 10.1287/mksc.1070.0323
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    References listed on IDEAS

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