Price Fairness in the Era of the Sharing Economy

Abstract

The meaning of price fairness in the sharing economy is examined in four experiments. The results suggest that the sharing economy evokes communal norms that make customers more sensitive to the unfairness of demand-based pricing. Specifically, the four studies demonstrate that (a) framing demand-based pricing as a surcharge is perceived as less fair than framing it as a foregone discount when used by a family on Airbnb but not when used by a hotel on Expedia or a hotel on Airbnb; (b) the effect of host (family vs. hotel) on the perceived fairness of surcharges is diminished when the surcharge is justified with an exchange good (free wifi service) but not when it is justified by a communal good (free cooking instruction); (c) the interaction of host by type of extra good on perceived price fairness is mediated by the activation of communal (vs. exchange) norms; and (d) the host-by-framing interaction has similar effects on booking intention as it does on perceived price fairness.

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