Fairness and Discounts: The Subjective Value of a Bargain

Abstract

In this work, we examined the surprising value consumers attach to getting a bargain. Past research has largely understood this phenomenon in terms of the impact discounts have on perceptions of fairness. However, the evidence for this explanation is inconclusive due to a number of viable alternatives as well as issues relating to construct and external validity. The experiments we report here provide clearer evidence for the basic assertion that discounts increase purchase satisfaction due to the nonfinancial rewards that are associated with perceptions of fairness. Furthermore, current notions of fairness in the promotion literature are extended by showing that social cues such as the relative size of the discount received by another customer and the loyalty status of that customer can also have an important impact on fairness and purchase satisfaction. We suggest an integration of transaction utility theory (Thaler, 1985) and equity theory (Bagozzi, 1975) to account for these findin