Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104370
Authors: 
Englmaier, Florian
Gratz, Linda
Reisinger, Markus
Year of Publication: 
2012
Series/Report no.: 
Munich Discussion Paper 2012-7
Abstract: 
We analyze the profitability of third degree price discrimination under consideration of consumers' fairness concerns within an experiment and explain the results within a theoretical framework. We find that with an increase in the price differential negative reciprocal reactions by disadvantaged consumers become stronger compared to positive reciprocal reactions by advantaged consumers. Consequently, the profit maximizing price differential lies below the one predicted to be optimal by standard theory. Further, profitability increases when consumers who are regarded as poorer are charged lower prices compared to when the wealth of the different consumer groups is unknown.
Subjects: 
price discrimination
reciprocal fairness
inequity aversion
experimental economics
JEL: 
D11
D12
E3
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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