"The Discount Is Unfair: Egocentric Fairness in Risky Discounts," Journal of Economic Psychology

Authors: Choi, Sung Chul; Park, Sang June; Qiu, Chun; Stanyer, Mike

Publication: Journal of Economic Psychology, December 2013

Abstract:

This paper examines how consumers perceive fairness and enjoy the outcome of an emerging risky discount: the retail industry's gambling or lottery type "scratch and save" (SAS) price promotions, in which the actual discount is determined by chance at the checkout. Risky discounts such as Scratch-and-Save promotions are relatively new retail tools with very little existing research. Previous work in discount claims focuses on perceptions of the offer, whereas this study focuses on perceptions of the outcome and provides managers with information for implementing risky discounts.Across four studies, experiments with a variety of discount levels and reference prices are used to gather consumers' responses to disparities between suggested and actual discounts. This paper finds that consumers perceive a promotional offering, which is smaller than the reference discount, as more unfair and less enjoyable, even when they still get a deal. However, consumers perceive a discount greater than the reference discount only as fair and enjoyable as the reference discount. Furthermore, poor outcomes are evaluated with severe negativity in terms of perceived fairness and enjoyment, whereas beneficial outcomes garner only moderate positivity, which is consistent with the combination of prospect theory and egocentric fairness. Nevertheless, perceptions of increased unfairness arising from risky discounts have no negative bearing on future purchase intentions, but rather result in positive attitudes and optimism for future risky discounts. © 2013 Elsevier B.V.