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In September 2000, Amazon.com attempted to implement a differential pricing structure that would track online purchasing behaviors to charge loyal customers higher prices for the same product. Amazon’s customers met this new pricing initiative with extreme displeasure, forcing the company to end its trial with differential pricing. Differential pricing is not new. Industries such as travel and retail have charged consumers different prices for years through special promotions such as frequent flyer miles and loyal customer discount cards. Why is it then that Amazon’s customers perceived the company’s differential pricing structure as being unfair? More importantly, are there times when such pricing is acceptable? An understanding of the concepts of distributive and procedural justice, as well as equity theory and dual entitlement, provides managers with the defining principles of price fairness. Implementing these concepts and theories into the firm’s pricing practices will increase the likelihood that customers will perceive differential pricing as being fair.

In the ever‐changing electronic environment of the twenty‐first century, price is one of the key strategic elements that is often overlooked by firms. The paper addresses differential pricing in business‐to‐consumer electronic commerce, in particular differential pricing for hotel services sold on the Internet. Hotels are able to take advantage of differential pricing for various segments because the market for hotels can be divided into narrow customer segments. An overview of e‐commerce and Internet marketing is provided. The characteristics of products sold online and differential pricing are discussed. Pricing policies for on‐line marketing are examined with a special emphasis on differential pricing, customer loyalty and segmentation. With the help of secondary data, online pricing strategies used by hotels on the Internet are evaluated. Finally, conclusions are drawn and implications for the hotel industry are discussed.

Looks at the differential method of pricing which arrives at a price by adding appropriate amounts to specific bases. Proposes that to realize the full benefits of such an approach price‐setters must have both intelligence and imagination as well as being aware of their industry's practices and traditions.

Discusses the various steps in differential pricing and integrates the economics of differential pricing with the marketing perspective. Explains the concept of differential pricing with the help of a mathematical model, and illustrates the use of differential pricing by using an example from the hotel industry.

The learning outcomes of this study are as follows:

1. the benefits of differential pricing over uniform pricing;

2. the differences between second- and third-degree price discrimination;

3. the rationale for charging different prices for segments having different willingness to pay; and

4. how different prices for the same product can lead to perceptions of unfairness and how companies might manage such an issue.

This case outlines the decisions that Adar Poonawalla, the CEO of Serum Institute of India (Serum), had to make in late April 2021 concerning its pricing for the COVID-19 (Covid) vaccine. Serum was the world’s largest manufacturer of vaccines, and its Covishield vaccine had received regulatory approval, but faced an unusual challenge and opportunity. In most countries, governments had procured Covid vaccines from manufacturers and then delivered the vaccines to consumers free of cost. But in India, there was a three-tier pricing system. While the Government of India had committed to free vaccines in government-run public hospitals, it also allowed vaccine makers to directly sell vaccines to state governments, as well as private hospitals, who were at liberty to charge consumers for the vaccines. This created an interesting pricing dilemma for Serum: as different customers had different willingness to pay, should Serum use differential pricing? Would such a tiered pricing system be considered fair? How many different price points should Serum maintain? By exploring these and related decisions that Poonawalla had to make, the case is intended to teach price discrimination.

The case is intended for graduate-level courses in marketing, pricing and economics. This case illustrates the principles of differential pricing/price discrimination. More specifically, it highlights pricing strategies motivated by second- and third-degree price discrimination in an emerging market’s health-care context. From the information in the case, the student can learn to apply the concepts of second- and third-degree price discrimination in marketing. After working through the case and assignment questions, instructors will be able to help students understand the following concepts:

Teaching objective 1: the benefits of differential pricing over uniform pricing.

Teaching objective 2: the differences between second- and third-degree price discrimination.

Teaching objective 3: the rationale for charging different prices for segments having different willingness to pay.

Teaching objective 4: how different prices for the same product can lead to perceptions of unfairness and how companies might manage such an issue.

Teaching notes are available for educators only.

CSS 8: Marketing

This paper aims to measure the trade price impact of a recent regulatory disclosure intervention in municipal securities secondary markets, which required broker-dealers to disclose securities trading information on a near-real-time and continuing basis.

The author analyzes trade price outcomes in the preintervention and postintervention regimes using a suite of time series estimations that give heteroskedasticity-robust standard errors (Prais–Winsten and Cochrain–Orcutt), accommodate higher-order lag structure in the error term (autoregressive integrated moving average) and account for volatility clustering in the time series (generalized autoregressive conditional heteroskedasticity).

Results show that regulatory disclosure intervention significantly improved trade price efficiency in municipal securities secondary markets as daily trade price differential and volatility both declined market-wide after the disclosure intervention.

The sample consists of trades in State of California general obligation bonds; therefore, empirical findings may not be generalizable to other states, local governments and different types of bonds.

The findings highlight voluntary information disclosure as a practical and effective mechanism in disclosure regulation of municipal securities secondary markets.

Only a small body of work exists that examines information disclosure regulation in municipal securities secondary markets; therefore, this paper expands knowledge on the topic and should provide renewed impetus for regulatory efforts aimed at improving the efficiency of municipal capital markets.

This article aims to extend the price‐quality trade‐off framework to derive new results for differential pricing strategies for brands in different brand tiers. The results are demonstrated for different market configurations.

A conceptual framework based on the quality‐price trade‐off from existing literature is used to analytically derive research hypotheses regarding pricing strategies. The results are demonstrated empirically by extending previously published results.

The study reveals that optimal pricing strategies are dependent on the tier to which the brands belong. Promotional pricing is better for high‐tier brands, while everyday low price is better for low‐tier brands. Similarly, deep and infrequent price promotions are better for high‐tier brands, while shallow and frequent promotions are better for low‐tier brands.

The findings offer some important implications of the brand‐tier competition framework for determining optimal pricing strategies and can inform pricing strategies for brands in different tiers.

Asymmetric inter‐tier competition is demonstrated for different market configurations, and the framework is used to derive optimal pricing strategy implications for brands in different tiers.

The nature of competition between different tiers (e.g. high‐tier vs low‐tier brands) has become an important research domain for academic researchers and marketing managers. Although research on inter‐tier competition is growing at an increasing rate, there has not been a comprehensive attempt to summarize the research in this stream. The objective of this article is to synthesize the research on inter‐tier competition, extract the key findings, discuss managerial implications, and offer future research directions.

This research seeks to identify three dimensions of price differential policies that influence judgments of the distributive, procedural, and informational justice of the policies and of the trustworthiness of the seller.

Four price differential policies were compared in a between‐subjects design. Subjects responded to scenarios in which they paid more than a friend for the same product because of a particular policy. Policies were compared on perceptions of fairness (using the social justice framework) and on perceptions of the seller's benevolence and credibility.

Consumer judgments of the informational and procedural justice of each policy depend on three key policy dimensions: whether or not all consumers are informed about how a discount could be obtained; whether consumers who received the discount were pre‐selected on the basis of their traits versus whether they received the discount because of some aspect of their transaction process behavior; and whether or not consumers could influence the amount of the price differential. Additionally, perceptions of procedural justice and informational justice have differential influence on the credibility and benevolence dimensions of trust.

The research offers the first empirically based generalizations about designing price differential policies that can minimize negative consumer judgments of the policy and of the seller. Additionally, the use of a social justice framework yields important insights on the multidimensional nature and consequences of fairness judgments.

When firms offer consumers a choice of price‐quality levels – the “good‐better‐best” choice – a challenge for managers is how to set price differentials. This article examines how consumer preferences across such price tiers are influenced by non‐price cues about quality. The results suggest that the pattern of preferences observed across price‐tiers can be influenced by: how quality cues (as well as price levels) are framed; the distribution of various price‐quality tradeoff strategies across potential buyers; and the degree of perceived quality variability within the product category. Specifically, the use of ratio‐scaled cues is most likely to impact “trading‐up” behavior when there are a large number of consumers who exhibit “best value‐seeking” behavior in a market.