Abstract

http://ssrn.com/abstract=1999757
 
 

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Price Discrimination and Fairness Concerns


Florian Englmaier


Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Linda Gratz


E.CA Economics; Ludwig-Maximilians-Universität München - Munich Graduate School of Economics (MGSE)

Markus Reisinger


WHU - Otto Beisheim School of Management; CESifo (Center for Economic Studies and Ifo Institute)

February 5, 2012


Abstract:     
We analyze the profitability of third degree price discrimination under consideration of consumers' fairness concerns within an experiment and explain the results within a theoretical framework. We find that with an increase in the price differential negative reciprocal reactions by disadvantaged consumers become stronger compared to positive reciprocal reactions by advantaged consumers. Consequently, the profit maximizing price differential lies below the one predicted to be optimal by standard theory. Further, profitability increases when consumers who are regarded as poorer are charged lower prices compared to when the wealth of the different consumer groups is unknown.

Number of Pages in PDF File: 33

Keywords: price discrimination, reciprocal fairness, inequity aversion, experimental economics

JEL Classification: D11, D12, E3

working papers series


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Date posted: February 6, 2012  

Suggested Citation

Englmaier, Florian and Gratz, Linda and Reisinger, Markus, Price Discrimination and Fairness Concerns (February 5, 2012). Available at SSRN: http://ssrn.com/abstract=1999757 or http://dx.doi.org/10.2139/ssrn.1999757

Contact Information

Florian Englmaier
Department of Economics ( email )
Ludwigstrasse 28
Munich, D-80539
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Linda Gratz (Contact Author)
E.CA Economics ( email )
Schlossplatz 1
Berlin, 10178
Germany
+49 30 21231 7087 (Phone)
+49 30 21231 7099 (Fax)
Ludwig-Maximilians-Universität München - Munich Graduate School of Economics (MGSE)
Kaulbachstrasse 45
München, 80539
Germany
Markus Reisinger
WHU - Otto Beisheim School of Management ( email )
Burgplatz 2
Vallendar, 56179
Germany
00 49 261 6509 290 (Phone)
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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