Does Widespread Dynamic Pricing Erase the Vestiges of Just-Price Thinking?

business_ethics_highlights_2This Wall Street Journal piece, about emerging technology and data-analysis techniques permitting more frequent and more volatile price changes in a variety of goods and services, at its very end backs into some interesting observations about consumers’ beliefs and attitudes about the ethics of pricing. It suggests that con-attitudes toward so-called price “gouging” or price discrimination may be less a function of considered commitments to some principle of justice than they are visceral reactions to a departure from customary practice. However, once the departure becomes the custom the con-attitude dissolves—or, as Wharton School marketing professor Peter Fader puts it, “The first time, it’s ‘That ain’t right.’ The second time, it’s all right.” This aspect of consumer psychology suggests the wisdom of the common law’s treatment of customary practice in, for example, contract law. Customary practice is normatively significant (particularly where the agreement is silent), but is not thereby entrenched: if the custom changes, the former custom is no longer invested with normative significance. By the same token, relatively static pricing’s normative significance may be entirely a function of it being customary (due to, for example, technical limitations on price changing). However, once it becomes technically possible to price everything the way airline tickets are priced and enough sellers do it, the custom changes and relatively static pricing is no longer invested with normative significance. >>>

LINK: Now Prices Can Change From Minute to Minute (by Jack Nicas for Wall Street Journal)

Consumers typically resist dynamic pricing when it is introduced, but then quickly acclimate, Mr. Fader said. Five years ago, Major League Baseball teams caught flak when they began changing ticket prices based on factors such as date, opponent, weather forecasts and seats remaining.

“Now pretty much every one of them is doing it routinely, and doing it with a remarkable lack of backlash,” Mr. Fader said. “The first time, it’s ‘That ain’t right.’ The second time, it’s all right.”

What do you think?

RELATED: BEH co-editor Alexei Marcoux, “Much Ado About Price Discrimination,” Journal of Markets & Morality 9(1) (2006): 57–69.

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