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

Anderson, Eric T.; Simester, Duncan I.
May 2008
Marketing Science;May/Jun2008, Vol. 27 Issue 3, p492
Academic Journal
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.


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