The Impact of Perceived Price Fairness of Dynamic Pricing on Customer Satisfaction and Behavioral Intentions: The Moderating Role of Customer Loyalty

Abstract

Applying theories and principles rooted in consumer behavior including equity theory and distributive justice, the current research presents a conceptual framework to explain the formation of price fairness perceptions that includes the impact of the magnitude and temporal proximity of price differences and the moderating effect of customer loyalty on the relationship between dynamic pricing mechanism and perceived price fairness. The current study also examines the impact of price fairness perceptions on customer satisfaction with purchase and behavioral intentions. A three-way (2 levels of magnitude of price difference X 2 levels of temporal proximity of price difference X 3 types of products) between-subjects experimental design was employed to collect data. Participants were recruited from a convenience sample of college students at Auburn University, Auburn AL, for pre- and pilot tests. Main experiment data was collected using student samples at Auburn University and Sam Houston State University, Huntsville TX. Using Structural Equation Modelling (SEM), this study finds that both the magnitude and temporal proximity of price difference are negatively associated with consumers’ perceptions of price fairness. Customer loyalty is found to be a significant moderator on the relationship between the magnitude and temporal proximity of price difference and perceived price fairness. Perceived price fairness has a strong positive impact on customer satisfaction with purchase. The study finds that perceived price fairness has a strong negative impact on consumers’ self-protection and revenge intentions, but a strong positive impact on re-purchase intention. The present study also finds that satisfactions with purchase fully mediates the relationship between perceived price fairness and re-purchase intention, but only partially the relationship between perceived price fairness and self-protection and revenge intentions. Theoretical and practical implications for these findings, along with recommendation for future study, are discussed.