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An Experimental Study on the Price Discrimination on the Internet: The Effect of Illusion of Control and Lateral Customer Relationship on Price Fairness  

Lee, Zoon-Ky (연세대학교 정보대학원)
Lee, Ji-Hae (삼성 SDS 연구원)
Publication Information
Journal of Information Technology Services / v.6, no.2, 2007 , pp. 19-33 More about this Journal
Abstract
The current advance of IT and the e-commerce triggers the wide practice of dynamic pricing in all industries although the price discrimination has been very cautiously applied in the limited areas in the past. The price discrimination which offers different prices for each customer depending on their preference and buying behaviors has recently gained attention as it could provide superior benefits to sellers. The wide adoption of price discrimination, on the other hand, is reported to face buyer resistances and complaints. Our limited understanding on the perception of price fairness, which we think is key concept in the price discrimination on the Internet-enabled transactions, motives us to investigate factors that affect the perception of price fairness. This study focuses on illusion of control and lateral customer relationship to investigate their effects on price fairness in online auction and group purchase context. By conducting laboratory experiments, our study demonstrates that customers' perception on illusion of control in price determination and advantageous lateral customer relationship significantly affect price fairness perception in both online auction and group purchase environment. The findings are expected to provide researchers and managers with useful insights to develop better pricing strategies and design effective dynamic pricing mechanisms.
Keywords
Price Differentiation; Dynamic Pricing; Internet; Price Fairness; Illusion of Control; Lateral Customer Relationship;
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