Perceived price fairness of dynamic pricing

Abstract

Purpose This study aims to adopt illusion of control and lateral consumer relationship in order to investigate their effects on price fairness in online auction and group buying context. These two variables have been known to have strong influences in fairness perception on consumers' decision‐making processes and outcomes. Design/methodology/approach The authors draw their conceptual foundations from previous studies, supplement this from the electronic commerce literature, and test the model through laboratory experiments. Findings The study demonstrates that consumers' perception on illusion control in price determination and advantageous lateral consumer relationship significantly affect price fairness perception in both the online auction and group buying environments. Research limitations/implications The findings are expected to provide researchers with useful insights to conduct future studies on uncovering the nomological networks associated with price fairness perception. Practical implications The findings are expected to help managers develop better pricing strategies and design effective dynamic pricing mechanisms. Originality/value The paper provides the first integrated perspective on the human decision processes in the dynamic pricing environment in electronic markets.