Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-24T17:29:47.213Z Has data issue: false hasContentIssue false
  • English
  • Français

The Ethics of Price Discrimination

Published online by Cambridge University Press:  20 July 2015

Juan M. Elegido
Rights & Permissions [Opens in a new window]

Abstract:

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

Price discrimination is the practice of charging different customers different prices for the same product. Many people consider price discrimination unfair, but economists argue that in many cases price discrimination is more likely to lead to greater welfare than is the uniform pricing alternative—sometimes for every party in the transaction. This article shows i) that there are many situations in which it is necessary to engage in differential pricing in order to make the provision of a product possible; and ii) that in many such situations, the seller does not obtain an above-average rate of return. It concludes that price discrimination is not inherently unfair. The article also contends that even when conditions i) and/or ii) do not obtain, price discrimination is not necessarily unethical. In itself, the fact that some people get an even better deal than do others does not entail that the latter are wronged.

Type
Articles
Information
Business Ethics Quarterly , Volume 21 , Issue 4 , October 2011 , pp. 633 - 660
Copyright
Copyright © Society for Business Ethics 2011

References

Ambrose, D. 1979. Retail grocery pricing: Inner-city, suburban, and rural comparisons. Journal of Business, 52: 95–102.Google Scholar
Anderson, E. 1999. What is the point of equality? Ethics, 109: 287–337.Google Scholar
Ayers, I. 1991. Fair driving: Gender and race discrimination in rental car negotiations. Harvard Law Review,104(4): 817–72.Google Scholar
Ayers, I.. 2001. Pervasive discrimination. Chicago: University of Chicago Press.Google Scholar
Ayers, I., & Siegelman, P. 1995. Race and gender discrimination in bargaining for a new car. The American Economic Review, 85(3): 304–21.Google Scholar
Baker, C. E. 1994. Advertising and a democratic press. Princeton, NJ: Princeton University Press.Google Scholar
Baumol, W. J., & Swanson, D. G. 2003. The new economy and ubiquitous competitive price discrimination: Identifying defensible criteria of market power. Antitrust Law Journal, 70(3): 661–85.Google Scholar
Boxill, B. 1992. Blacks and social justice (revised ed.). Lanham, MD: Rowman and Littlefield.Google Scholar
Campbell, M. C. 1999. Why did you do that? The important role of inferred motive in perceptions of price fairness. Journal of Product and Brand Management, 8: 145–52.Google Scholar
Casale, J., Esola, L. & Wojcik, J. 2007. iPhone price cut makes N.Y. woman irate. Business Insurance, 1(41): 68.Google Scholar
Chen, Y., Moorthy, S., & Zhang, Z. J. 2005. Price discrimination after the purchase: Rebates as state-dependent discounts. Management Science, 51(7): 1131–40.Google Scholar
City of New York, Department of Consumer Affairs. 1992. Gypped by gender: A study of price bias against women in the marketplace.Google Scholar
Clerides, S. 2004. Book value: Inter-temporal pricing and quality discrimination in the U.S. markets for books. Economic Inquiry, 42: 402–12.Google Scholar
Cohen, G. A. 1989. On the currency of egalitarian justice. Ethics, 99: 906–44.Google Scholar
Cohen, G. A.. 2000. If you’re an egalitarian, how come you’re so rich? Cambridge, MA: Harvard University Press Google Scholar
Crisp, R. 2003. Equality, priority and compassion. Ethics, 113(4): 745–63.Google Scholar
Doherty, J. M. 2008. Law in an elevator: When leveling down remedies let equality off in the basement. California Law Review, 81: 1017–65.Google Scholar
Dupuit, J. 1849. Annales des ponts et chausses, 17(2): 83–110. Translated as “On Tolls and Transport Charges,” in International Economic Papers. London: Macmillan, 1952.Google Scholar
Dworkin, R. 1977. Taking rights seriously, Cambridge, MA: Harvard University Press.Google Scholar
Dworkin, R.. 1981. What is equality? II. Equality of resources. Philosophy and Public Affairs, 10: 283–345.Google Scholar
Dworkin, R.. 2000. Sovereign virtue, Cambridge, MA: Harvard University Press.Google Scholar
Ekelund, R. B. 1970. Price discrimination and product differentiation in economic theory: An early analysis. Quarterly Journal of Economics, 84: 268–78.Google Scholar
Elegido, J. M. 1996. Fundamentals of business ethics: A developing country perspective. Ibadan: Spectrum Books.Google Scholar
Elegido, J. M.. 1998. La Responsabilidad Básica de la Empresa hacia sus Clientes.” In Mele, D. (Ed.), Etica en dirección comercial y publicidad: 87–101. Barcelona: Estudios y Ediciones IESE.Google Scholar
Elegido, J. M.. 2009. The just price: Three insights from the Salamanca School. Journal of Business Ethics, 90: 29–46.Google Scholar
Finke, M., Chern, W. & Fox, J. 1997. Do the urban poor pay more for food? Issues in measurement. Advancing the Consumer Interest, 9(1): 13–17.Google Scholar
Finnis, J. M. 1980. Natural law and natural rights, Oxford: Clarendon Press.Google Scholar
Frank, R. 2001. Prescription drug prices: Why do some pay more than others do?” Health Affairs, 20(2): 115–28.Google Scholar
Frank, R. H. 1988. Passions within reason: The strategic role of the emotions. New York: W. W. Norton.Google Scholar
Frank, R. H.. 2006. How much is that laptop? It depends on the color of the case. And that’s fair. The New York Times (July 6).Google Scholar
Frankfurt, H. 1997. Equality and respect. Social Research, 64: 3–15.Google Scholar
Gosepath, S. 2009 Equality. In Zalta, Edward N. (Ed.), The Stanford Encyclopedia of Philosophy (Winter 2009 edition). http://plato.stanford.edu/archives/win2009/entries/equality/.Google Scholar
Grewal, D., & Compeau, L. D. 1999. Pricing and public policy: A research agenda and an overview of the special issue. Journal of Public Policy and Marketing, 18: 3–10.Google Scholar
Groom, P. 1966. Prices in poor neighborhoods. Monthly Labor Review, 89: 1085–90.Google Scholar
Hayes, L. R. 2000. Are prices higher for the poor in New York City? Journal of Consumer Policy, 23: 127–52.Google Scholar
Howell, J. 1991. Potential profitability and decreased consumer welfare through manufacturers’ cents-off coupons. The Journal of Consumer Affairs, 25: 164–84.Google Scholar
Huang, M. 2005. Unequal pricing in the information economy: Implications for consumer welfare. Journal of Business Ethics, 56: 305–15.Google Scholar
Kahneman, D., Knetsch, J. L., & Thaler, R. H. 1986. Faairness and the assumptions of economics. Journal of Business, 59(4), pt. 2: 285–300.Google Scholar
Krugman, P. 2000. What price fairness? The New York Times (October 4): A31.Google Scholar
Larkin, I. 2008. Bargains-then-ripoffs: Innovation, pricing and lock-in enterprise software. Best Paper Proceedings of the Academy of Management.Google Scholar
Levine, M. E. 2002. Price discrimination without market power. Yale Journal on Regulation, 19: 1–36.Google Scholar
Liston-Heyes, C., & Neokleous, E. 2000. Gender-based pricing in the hairdressing industry. Journal of Consumer Policy, 23: 107–26.Google Scholar
Lott, J. R. Jr., & Roberts, R. D. 1991. A guide to pitfalls of identifying price discrimination. Economic Inquiry, 29: 14–23.Google Scholar
Marcoux, A. M. 2006. Much ado about price discrimination. Journal of Markets and Morality, 9(1): 57–69.Google Scholar
McCartney, S. 2010. “Kennedy Pushed Airline Deregulation, Changed U.S. Air Travel.” Wall Street Journal (August 26).Google Scholar
McPherson, M. S., & Schapiro, M. O. 1998. The student aid game: Meeting need and rewarding talent in american higher education. Princeton, NJ: Princeton University Press.Google Scholar
McWilliams, G. 2001. Lean machine: How Dell fine-tunes its PC pricing to gain an edge in slow market. Wall Street Journal (June 8).Google Scholar
Michel, C. 1999. What is a ‘just price’? Journal of Markets and Morality, 2(2): 182–96.Google Scholar
Miller, D. 1998. Equality and justice. In Mason, A. (Ed.), Ideals of equality: 21–36. Oxford: Blackwell Publishers.Google Scholar
Mueller, C. E. 2004. Two varieties of price discrimination in 2004: Airline “targetting” versus Wal-Mart “blietzkrieg.” Antitrust Law & Economics Review, 32(3): 1–24.Google Scholar
Nagel, T. 1991. Equality and partiality. New York: Oxford University Press.Google Scholar
Nagel, T.. 2002. Equality. In Clayton, M. & Williams, A. (Eds.), The ideal of equality: 60–80. New York: Palgrave Macmillan.Google Scholar
Narasimhan, C. 1984. A price discrimination theory of coupons. Marketing Science, 3 (Spring): 128–47.Google Scholar
Nozick, R. 1974. Anarchy, state, and utopia. New York: Basic Books.Google Scholar
Odlyzko, A. M. 2004a. Access to the literature: The debate continues. Nature Web Forum (March 25).Google Scholar
Odlyzko, A. M.. 2004b. The evolution of price discrimination in transportation and its implications for the Internet. Review of Network Economics, 3(3): 323–46.Google Scholar
Parfit, D. 1998. Equality and priority. In Mason, A. (Ed.), Ideals of equality: 1–20. Oxford: Basil Blackwell.Google Scholar
Parfit, D.. 2000. Equality or priority. In Clayton, M. and Williams, A. (Eds.), The ideal of equality, 81–125. New York: St. Martin’s Press.Google Scholar
Phlips, L. 1983. The economics of price discrimination. London: Cambridge University Press.Google Scholar
Pogge, T. 2000. On the site of distributive justice: Reflections on Cohen and Murphy. Philosophy & Public Affairs, 29: 137–65.Google Scholar
Pride, W. M., & Ferrell, O. C. 2010. Marketing. Mason, OH: South-Western Cengage Learning.Google Scholar
Rakowski, J. J. 2004. Does the consumer have an obligation to cooperate with price discrimination? Business Ethics Quarterly, 14: 263–74.Google Scholar
Raz, J. 1986. The morality of freedom. Oxford: Clarendon Press.Google Scholar
Rawls, J. 1971. A theory of justice. Cambridge, MA: Harvard university Press.Google Scholar
Rawls, J.. 1993. Political liberalism. New York: Columbia University Press.Google Scholar
Rosenbaum, D. I., & Ye, M. 1997. Price discrimination and economics journals. Applied Economics, 29: 1611–18.Google Scholar
Sample, R. J. 2003. Exploitation: What it is and why it is wrong. New York: Rowman and Littlefield.Google Scholar
Scanlon, T. M. 2002. The diversity of objections to inequality. In Clayton, M. & Williams, A. (Eds.), The ideal of equality. New York: Palgrave MacMillan.Google Scholar
Scheffler, S. 2001. Boundaries and allegiances. Oxford: Oxford University Press.Google Scholar
Schmalensee, R. 1981. Output and welfare implications of monopolistic third-degree price discrimination. American Economic Review, 71: 242–47.Google Scholar
Schwartz, M. 1990. Third-degree price discrimination and output: Generalizing a welfare result. American Economic Review, 80: 1259–62.Google Scholar
Sen, A. 1980. Equality of what? In McMurrin, S. (Ed.), The Tanner Lectures on Human Values, I. Cambridge: Cambridge University Press.Google Scholar
Shapiro, C., & Varian, H. R. 1998. Versioning: The smart way to sell information. Harvard Business Review, 76(6): 106–14.Google Scholar
Sinha, I. 2000. Cost transparency: The net’s real threat to prices and brands. Harvard Business Review, 78(2): 43–50.Google Scholar
Snyder, J. 2010. Exploitation and sweatshop labor: Perspectives and issues. Business Ethics Quarterly, 20: 187–213.Google Scholar
Stigler, G. 1987. A theory of price. New York: Macmillan.Google Scholar
Stole, L. A. 2007. Price discrimination and competition. In Armstrong, M. & Porter, R. (Eds.), Handbook of industrial organization, vol. 3. Amsterdan: Elsevier B.V.Google Scholar
Temkin, L.S. 1993. Inequality. New York: Oxford University Press.Google Scholar
Temkin, L.S.. 2000. Equality, priority and the levelling down objection. In Clayton, M. & Williams, A. (Eds.), The ideal of equality. New York: Palgrave MacMillan.Google Scholar
Temkin, L.S.. 2003. Equality, priority or what? Economics and Philosophy, 19: 61–87.Google Scholar
Temkin, L.S.. 2009. Illuminating egalitarianism. In Christiano, T. & Christman, J. P. (Eds.), Contemporary debates in political philosophy. London: Blackwell.Google Scholar
Tirole, J. 1989. The theory of industrial organizationion. Cambridge, MA: MIT Press.Google Scholar
Turow, J. 2005. Have they got a deal for you. Washington Post (June 19): B01.Google Scholar
Valdman, M. 2009. A theory of wrongful exploitation. Philosophers’ Imprint, 9(6): 1–14.Google Scholar
Varian, H. R. 1980. A model of sales. American Economic Review, 70: 651–59. (See also erratum: American Economic Review, 71: 517.)Google Scholar
Varian, H. R.. 1985. Price discrimination and social welfare. American Economic Review, 75: 870–75.Google Scholar
Varian, H. R.. 1992. Microeconomic analysis, 3rd ed. London: Norton.Google Scholar
Varian, H. R.. 1996. Differential pricing and efficiency. First Monday, 1(2).Google Scholar
Varian, H. R.. 1997. Versioning information goods. http://www,sims.berkeley,edu/-.~hal/people/hal/papers.html/.Google Scholar
Varian, H. R.. 2000. A big factor in prescription drug pricing: Location, location, location. New York Times (September 21).Google Scholar
Vitell, S. J., Rawwas, M. Y. A., & Festerband, T. A. 1991. The business ethics of pharmacists: conflicts, practices and beliefs. Journal of Business Ethics, 10: 295–301.Google Scholar
Walzer, M. 1983. Spheres of justice: A defence of pluralism and equality. New York: Basic Books.Google Scholar
Wertheimer, A. 1996. Exploitation. Princeton, NJ: Princeton University Press.Google Scholar
Williams, A. 1998. Incentives, inequalaity and publicity. Philosophy and Public Affairs, 27(3): 225–47.Google Scholar
Young, I. M. 1990. Justice and the politics of difference. Princeton, NJ: Princeton University Press.Google Scholar
Zwolinski, M. 2007. Sweatshops, choice, and exploitation. Business Ethics Quarterly, 17: 689–727.Google Scholar
Zwolinski, M.. 2008. The ethics of price gouging. Business Ethics Quarterly, 18: 347–78.Google Scholar