Transparency in pricing and its effect on perceived price fairness

Purpose – This research aims to examine the effects of transparency in pricing (i.e. disclosure of a price increase and extent of explanation) on perceived price fairness when a firm increases price. Design/methodology/approach – US adult consumer panelists participated in two online experiments. Findings – Consumers perceive a firm's price increase as more fair when the firm discloses the increase itself as compared to an outside source disclosing it. For a small price increase, a limited explanation was perceived as more fair; for a larger price increase, a more detailed aligned cost explanation was perceived as more fair. Research limitations/implications – Firms who must raise prices may increase consumer perceptions of price fairness by disclosing the price increase and providing an appropriate explanation matched to the size of the increase. Originality/value – This research focuses on the effects of being more transparent about pricing in the case of a price increase. Perceived price fairness is affected by who discloses the price increase, the amount of the price increase and the extent to which reasons are revealed and aligned with the firm's costs.