Individual Price Discriminaton – An impossibility?

As electronic channels to the customer (intelligent shelves, E-Commerce) are ideally suited to better comprehend customers' price sensitivity, communicate pricing policies and adjust prices regularly marketers are eager to charge people differently for the same product and according to their willingness to pay. This practice implies that not all customers are treated equally. Fairness concerns and privacy issues arise. In fact, when Amazon.com trialed this type of practice it encountered strong customer backlash. Despite this negative experience, this paper challenges the common notion that personalized prices are generally perceived as unfair and shows ways on how online channels may be used to raise fairness perceptions. An extensive overview of the pricing and fairness literature from economics is given. Furthermore, empirical results from an experiment with 160 subjects are presented.