Online dynamic pricing and consumer-perceived ethicality: Synthesis and future research

Abstract

In the era of Big Data, online retailers’ pricing strategies are evolving towards an online dynamic pricing system, which consists in frequent modifications of the prices of goods and services in order to maximize sales and profits. This strategy raises important ethical questions, because consumers end up paying different prices for the same product. The aim of our article is to examine, from the consumer’s point of view, the ethical issues raised by online dynamic pricing. We propose a conceptual framework and a future research agenda with regard to consumers’ perceived ethicality about this strategy.

Mapping the Ethicality of Algorithmic Pricing: A Review of Dynamic and Personalized Pricing

“…Digital tracking via 'cookies' and 'digital breadcrumbs' allow firms to analyze consumer behavior data and to decipher personal characteristics and preferences, to implement (almost) perfect price discrimination by identifying a customer's reservation price, the individual willingness to pay (Bitran and Caldentey 2003;Ezrachi and Stucke 2016). What remains invisible for the eye of most consumers, is the fact that their online behavior creates a long data trace consisting of personal characteristics such as location data, browsing and purchasing history, social media posts and 'likes,' and so on (Ayadi et al 2017). In sum, these personal characteristics allow firms to build fine-grained profiles about individual purchasing preferences, tastes, and habits that often also reveal a customer's income or health status (Steppe 2017).…”

Progressive Pricing: The Ethical Case for Price Personalization

“…We should not ignore the common 'gut reaction' that two people paying different prices for the same thing is unjust, which was described in the opening of this paper. Although this reaction is common among laypeople as previously described, and although some academics assert, "From an ethical point of view, charging different prices for the same product is a violation of the equal treatment norm that underlies market exchanges" (Ayadi et al 2017), Elegido (2011, p. 641) correctly summarizes the state of ethical inquiry into a supposed equal treatment norm in pricing: "…no good arguments have been provided in the literature on equality to support the position that an equal treatment norm applies Fig. 3 The Utilitarian versus Prioritarian social welfare functions to commercial transactions, and, more specifically, to pricing issues, and…there are important considerations that urge against such a norm in this context."…”

“…The explosion of big data, increasing sophistication of machine-learning tools, and the growing popularity of online shopping have created the conditions for 'price personalization' by online merchants, in which individual customers are given different prices for the same products based on their specific consumption behaviors and preferences (Ayadi et al 2017). In industries where the marginal cost to production is trivial (as in music and video streaming services, the distribution of software, and social network applications), the pressure for such personalized pricing is much greater, as it is impossible for firms to be profitable when prices are set near marginal costs (Phlips 1983).…”

Couple Ethical Purchase Behavior and Joint Decision Making: Understanding the Interaction Process and the Dynamics of Influence

“…The literature shows that some consumers express willingness to purchase ethically, but their actual purchase behavior remains unaffected by their verbalized ethical concerns [28][29][30][31]. This gap between what consumers say they are going to do and what they actually do is referred to as the attitude-behavior gap [32][33][34].…”