The Moderating Role of Familiarity in Fairness Perceptions of Revenue Management Pricing

Abstract

Perceived fairness of revenue management (RM) pricing is a serious concern, as RM uses different prices for fundamentally the same service. The authors examine the effects of familiarity with an RM pricing practice, framing of prices, and fencing condition (i.e., whether a respondent was advantaged or disadvantaged by an RM price) on fairness perceptions. The authors conduct two experiments and find that familiarity moderated the effects of framing and fencing condition on consumers’ fairness perceptions. Specifically, framing and fencing condition had strong effects on perceived fairness when respondents were less familiar with a pricing practice. However, when familiarity was high, neither the framing nor fencing condition effect was significant. Our findings suggest that familiarity may be a boundary condition for prospect theory.