Skip to main content
×
×
Home

The Ethics of Price Discrimination

  • Juan M. Elegido
Abstract:

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.

    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      The Ethics of Price Discrimination
      Available formats
      ×
      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      The Ethics of Price Discrimination
      Available formats
      ×
      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      The Ethics of Price Discrimination
      Available formats
      ×
Copyright
References
Hide All
Ambrose, D. 1979. Retail grocery pricing: Inner-city, suburban, and rural comparisons. Journal of Business, 52: 95102.
Anderson, E. 1999. What is the point of equality? Ethics, 109: 287337.
Ayers, I. 1991. Fair driving: Gender and race discrimination in rental car negotiations. Harvard Law Review,104(4): 81772.
Ayers, I.. 2001. Pervasive discrimination. Chicago: University of Chicago Press.
Ayers, I., & Siegelman, P. 1995. Race and gender discrimination in bargaining for a new car. The American Economic Review, 85(3): 30421.
Baker, C. E. 1994. Advertising and a democratic press. Princeton, NJ: Princeton University Press.
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): 66185.
Boxill, B. 1992. Blacks and social justice (revised ed.). Lanham, MD: Rowman and Littlefield.
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: 14552.
Casale, J., Esola, L. & Wojcik, J. 2007. iPhone price cut makes N.Y. woman irate. Business Insurance, 1(41): 68.
Chen, Y., Moorthy, S., & Zhang, Z. J. 2005. Price discrimination after the purchase: Rebates as state-dependent discounts. Management Science, 51(7): 113140.
City of New York, Department of Consumer Affairs. 1992. Gypped by gender: A study of price bias against women in the marketplace.
Clerides, S. 2004. Book value: Inter-temporal pricing and quality discrimination in the U.S. markets for books. Economic Inquiry, 42: 40212.
Cohen, G. A. 1989. On the currency of egalitarian justice. Ethics, 99: 90644.
Cohen, G. A.. 2000. If you’re an egalitarian, how come you’re so rich? Cambridge, MA: Harvard University Press
Crisp, R. 2003. Equality, priority and compassion. Ethics, 113(4): 74563.
Doherty, J. M. 2008. Law in an elevator: When leveling down remedies let equality off in the basement. California Law Review, 81: 101765.
Dupuit, J. 1849. Annales des ponts et chausses, 17(2): 83110. Translated as “On Tolls and Transport Charges,” in International Economic Papers. London: Macmillan, 1952.
Dworkin, R. 1977. Taking rights seriously, Cambridge, MA: Harvard University Press.
Dworkin, R.. 1981. What is equality? II. Equality of resources. Philosophy and Public Affairs, 10: 283345.
Dworkin, R.. 2000. Sovereign virtue, Cambridge, MA: Harvard University Press.
Ekelund, R. B. 1970. Price discrimination and product differentiation in economic theory: An early analysis. Quarterly Journal of Economics, 84: 26878.
Elegido, J. M. 1996. Fundamentals of business ethics: A developing country perspective. Ibadan: Spectrum Books.
Elegido, J. M.. 1998. La Responsabilidad Básica de la Empresa hacia sus Clientes.” In Mele, D. (Ed.), Etica en dirección comercial y publicidad: 87101. Barcelona: Estudios y Ediciones IESE.
Elegido, J. M.. 2009. The just price: Three insights from the Salamanca School. Journal of Business Ethics, 90: 2946.
Finke, M., Chern, W. & Fox, J. 1997. Do the urban poor pay more for food? Issues in measurement. Advancing the Consumer Interest, 9(1): 1317.
Finnis, J. M. 1980. Natural law and natural rights, Oxford: Clarendon Press.
Frank, R. 2001. Prescription drug prices: Why do some pay more than others do?” Health Affairs, 20(2): 11528.
Frank, R. H. 1988. Passions within reason: The strategic role of the emotions. New York: W. W. Norton.
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).
Frankfurt, H. 1997. Equality and respect. Social Research, 64: 315.
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/.
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: 310.
Groom, P. 1966. Prices in poor neighborhoods. Monthly Labor Review, 89: 108590.
Hayes, L. R. 2000. Are prices higher for the poor in New York City? Journal of Consumer Policy, 23: 12752.
Howell, J. 1991. Potential profitability and decreased consumer welfare through manufacturers’ cents-off coupons. The Journal of Consumer Affairs, 25: 16484.
Huang, M. 2005. Unequal pricing in the information economy: Implications for consumer welfare. Journal of Business Ethics, 56: 30515.
Kahneman, D., Knetsch, J. L., & Thaler, R. H. 1986. Faairness and the assumptions of economics. Journal of Business, 59(4), pt. 2: 285300.
Krugman, P. 2000. What price fairness? The New York Times (October 4): A31.
Larkin, I. 2008. Bargains-then-ripoffs: Innovation, pricing and lock-in enterprise software. Best Paper Proceedings of the Academy of Management.
Levine, M. E. 2002. Price discrimination without market power. Yale Journal on Regulation, 19: 136.
Liston-Heyes, C., & Neokleous, E. 2000. Gender-based pricing in the hairdressing industry. Journal of Consumer Policy, 23: 10726.
Lott, J. R. Jr., & Roberts, R. D. 1991. A guide to pitfalls of identifying price discrimination. Economic Inquiry, 29: 1423.
Marcoux, A. M. 2006. Much ado about price discrimination. Journal of Markets and Morality, 9(1): 5769.
McCartney, S. 2010. “Kennedy Pushed Airline Deregulation, Changed U.S. Air Travel.” Wall Street Journal (August 26).
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.
McWilliams, G. 2001. Lean machine: How Dell fine-tunes its PC pricing to gain an edge in slow market. Wall Street Journal (June 8).
Michel, C. 1999. What is a ‘just price’? Journal of Markets and Morality, 2(2): 18296.
Miller, D. 1998. Equality and justice. In Mason, A. (Ed.), Ideals of equality: 2136. Oxford: Blackwell Publishers.
Mueller, C. E. 2004. Two varieties of price discrimination in 2004: Airline “targetting” versus Wal-Mart “blietzkrieg.” Antitrust Law & Economics Review, 32(3): 124.
Nagel, T. 1991. Equality and partiality. New York: Oxford University Press.
Nagel, T.. 2002. Equality. In Clayton, M. & Williams, A. (Eds.), The ideal of equality: 6080. New York: Palgrave Macmillan.
Narasimhan, C. 1984. A price discrimination theory of coupons. Marketing Science, 3 (Spring): 12847.
Nozick, R. 1974. Anarchy, state, and utopia. New York: Basic Books.
Odlyzko, A. M. 2004a. Access to the literature: The debate continues. Nature Web Forum (March 25).
Odlyzko, A. M.. 2004b. The evolution of price discrimination in transportation and its implications for the Internet. Review of Network Economics, 3(3): 32346.
Parfit, D. 1998. Equality and priority. In Mason, A. (Ed.), Ideals of equality: 120. Oxford: Basil Blackwell.
Parfit, D.. 2000. Equality or priority. In Clayton, M. and Williams, A. (Eds.), The ideal of equality, 81125. New York: St. Martin’s Press.
Phlips, L. 1983. The economics of price discrimination. London: Cambridge University Press.
Pogge, T. 2000. On the site of distributive justice: Reflections on Cohen and Murphy. Philosophy & Public Affairs, 29: 13765.
Pride, W. M., & Ferrell, O. C. 2010. Marketing. Mason, OH: South-Western Cengage Learning.
Rakowski, J. J. 2004. Does the consumer have an obligation to cooperate with price discrimination? Business Ethics Quarterly, 14: 26374.
Raz, J. 1986. The morality of freedom. Oxford: Clarendon Press.
Rawls, J. 1971. A theory of justice. Cambridge, MA: Harvard university Press.
Rawls, J.. 1993. Political liberalism. New York: Columbia University Press.
Rosenbaum, D. I., & Ye, M. 1997. Price discrimination and economics journals. Applied Economics, 29: 161118.
Sample, R. J. 2003. Exploitation: What it is and why it is wrong. New York: Rowman and Littlefield.
Scanlon, T. M. 2002. The diversity of objections to inequality. In Clayton, M. & Williams, A. (Eds.), The ideal of equality. New York: Palgrave MacMillan.
Scheffler, S. 2001. Boundaries and allegiances. Oxford: Oxford University Press.
Schmalensee, R. 1981. Output and welfare implications of monopolistic third-degree price discrimination. American Economic Review, 71: 24247.
Schwartz, M. 1990. Third-degree price discrimination and output: Generalizing a welfare result. American Economic Review, 80: 125962.
Sen, A. 1980. Equality of what? In McMurrin, S. (Ed.), The Tanner Lectures on Human Values, I. Cambridge: Cambridge University Press.
Shapiro, C., & Varian, H. R. 1998. Versioning: The smart way to sell information. Harvard Business Review, 76(6): 10614.
Sinha, I. 2000. Cost transparency: The net’s real threat to prices and brands. Harvard Business Review, 78(2): 4350.
Snyder, J. 2010. Exploitation and sweatshop labor: Perspectives and issues. Business Ethics Quarterly, 20: 187213.
Stigler, G. 1987. A theory of price. New York: Macmillan.
Stole, L. A. 2007. Price discrimination and competition. In Armstrong, M. & Porter, R. (Eds.), Handbook of industrial organization, vol. 3. Amsterdan: Elsevier B.V.
Temkin, L.S. 1993. Inequality. New York: Oxford University Press.
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.
Temkin, L.S.. 2003. Equality, priority or what? Economics and Philosophy, 19: 6187.
Temkin, L.S.. 2009. Illuminating egalitarianism. In Christiano, T. & Christman, J. P. (Eds.), Contemporary debates in political philosophy. London: Blackwell.
Tirole, J. 1989. The theory of industrial organizationion. Cambridge, MA: MIT Press.
Turow, J. 2005. Have they got a deal for you. Washington Post (June 19): B01.
Valdman, M. 2009. A theory of wrongful exploitation. Philosophers’ Imprint, 9(6): 114.
Varian, H. R. 1980. A model of sales. American Economic Review, 70: 65159. (See also erratum: American Economic Review, 71: 517.)
Varian, H. R.. 1985. Price discrimination and social welfare. American Economic Review, 75: 87075.
Varian, H. R.. 1992. Microeconomic analysis, 3rd ed. London: Norton.
Varian, H. R.. 1996. Differential pricing and efficiency. First Monday, 1(2).
Varian, H. R.. 1997. Versioning information goods. http://www,sims.berkeley,edu/-.~hal/people/hal/papers.html/.
Varian, H. R.. 2000. A big factor in prescription drug pricing: Location, location, location. New York Times (September 21).
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: 295301.
Walzer, M. 1983. Spheres of justice: A defence of pluralism and equality. New York: Basic Books.
Wertheimer, A. 1996. Exploitation. Princeton, NJ: Princeton University Press.
Williams, A. 1998. Incentives, inequalaity and publicity. Philosophy and Public Affairs, 27(3): 22547.
Young, I. M. 1990. Justice and the politics of difference. Princeton, NJ: Princeton University Press.
Zwolinski, M. 2007. Sweatshops, choice, and exploitation. Business Ethics Quarterly, 17: 689727.
Zwolinski, M.. 2008. The ethics of price gouging. Business Ethics Quarterly, 18: 34778.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Business Ethics Quarterly
  • ISSN: 1052-150X
  • EISSN: 2153-3326
  • URL: /core/journals/business-ethics-quarterly
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed