Journal of Business Research 69 (2016) 2634–2640

Contents lists available at ScienceDirect

Journal of Business Research

How fitting! The influence of fence-context fit on price

discrimination fairness
Andrew Kuo, Dan Hamilton Rice ⁎, Patrick Fennell
Louisiana State University, Department of Marketing, 2100 Business Education Complex, Baton Rouge, LA 70803, USA

a r t i c l e i n f o a b s t r a c t

Article history: Price discrimination fairness research demonstrates that the level of familiarity consumers have with a price dis-
Received 21 May 2015 crimination tactic influences their fairness judgments. In this paper, the authors empirically demonstrate that
Received in revised form 21 April 2016 these findings are not universal. Specifically, the findings indicate that the fit between the (a) variables upon
Accepted 22 April 2016
which the price discrimination tactic focuses and (b) the decision criteria by which products or services offered
Available online 30 April 2016
by the firm are judged (i.e., fence-context fit) moderates the impact of the familiarity on price discrimination fair-
Keywords:
ness judgments. Two experiments examine how the factors of fence-context fit and familiarity lead to different
Price discrimination fairness price discrimination fairness judgments and provide process evidence of a critical affective component of con-
Fence-context fit sumer response to price discrimination tactics based on suspicion. The findings provide implications for man-
Affect agers to carefully consider price discrimination policies by taking adequate precautions in an effort to reduce
Suspicion perceptions of unfairness.
Rate fences © 2016 Elsevier Inc. All rights reserved.

1. Introduction
Previous marketing research demonstrates that how consumers
perceive the price fairness of an offer is a critical determinant of con-
sumer response (Campbell, 1999; Sheng, Bao, & Pan, 2007; Carlson &
Weathers, 2008; Bolton, Keh, & Alba, 2010). Unfair perceptions of a
price can lead to buyers having lower purchase intentions (Bolton et al.,
2010; Grewal, Hardesty, & Iyer, 2004), increased intention to spread neg-
ative word-of-mouth (Ferguson, Ellen, & Bearden, 2013) and lower inten-
tions to shop with an entity (Campbell, 1999). If they wish to create an
effective pricing strategy, marketing managers must be aware of how
consumers view the fairness of prices in the proposed strategy.
The majority of research in price fairness focuses upon the attribu-
tion of the price increase (Vaidyanathan & Aggarwal, 2003; Martin,
Ponder, & Lueg, 2009) and how a firm justifies its price increases to all
consumers (Campbell, 1999, 2007; Bolton, Warlop, & Alba, 2003). Re-
search in this vein often examines distributive fairness, based on wheth-
er the price is more or less fair across variations in the underlying cost
structures, transaction differences, or business relationship stage
(Bolton et al., 2003; Bolton & Alba, 2006). Consumers also frequently in-
terpret price fairness in light of the principle of dual-entitlement, which
suggests that consumers determine a price's fairness based upon a ref-
erence price and a reference profit (Kahneman, Knetsch, & Thaler,
1986a, 1986b; Vaidyanathan & Aggarwal, 2003; Haws & Bearden,
2006). If consumers feel a price increase is based on invalid reasons,
⁎ Corresponding author.
E-mail addresses: akuo@lsu.edu (A. Kuo), danrice@lsu.edu (D.H. Rice),
pfenne1@lsu.edu (P. Fennell).
they may infer negative firm motives that create negative implications
for the firm (Campbell, 1999; Grewal et al., 2004; Bechwati, Sisodia, &
Sheth, 2009; Martin et al., 2009; Homburg, Totzek, & Krämer, 2014).
Despite the risks, various firms implement revenue management
policies that incorporate third degree price discrimination, whereby
firms selectively price higher or lower to different groups of consumers
(Wirtz & Kimes, 2007; Ferguson, 2014). As described by Samuelson and
Marks (2008), first degree price discrimination encompasses monopo-
listic pricing to sell at each individual customer's maximum price. Sec-
ond degree price discrimination deals with quantity discounts. Third
degree price discrimination (the focus of this research) occurs when a
firm charges different prices to different customer segments. This prac-
tice is alternatively referred to in the literature as variable consumer
pricing (Heyman & Mellers, 2008). For clarity and simplicity, the term
price discrimination is used to refer to third degree price discrimination
for the remainder of the paper. In lieu of cost structure or transactional
characteristics that must be defensible to all customers relative to other
prices and seller costs (e.g., Bolton et al., 2003; Bolton & Alba, 2006),
these firms often price discriminate based upon factors like time of pur-
chase, location of service, temperature, or randomized price compo-
nents between different customer groups with some paying more and
some less for the same product or service (Kimes & Wirtz, 2002;
Heyman & Mellers, 2008). In these scenarios, consumers also consider
the fairness of the price discrimination practice itself (Wirtz & Kimes,
2007; Heyman & Mellers, 2008; Ferguson et al., 2013), often based on
procedural fairness (Van den Bos, Lind, Vermunt, & Wilke, 1997;
Ferguson et al., 2013). While research has established many affective
factors that influence distributive price fairness judgments (Xia,
Monroe, & Cox, 2004; Peine, Heitmann, & Herrmann, 2009; Wu, Liu,

http://dx.doi.org/10.1016/j.jbusres.2016.04.020
0148-2963/© 2016 Elsevier Inc. All rights reserved.
 A. Kuo et al. / Journal of Business Research 69 (2016) 2634–2640
Chen, & Wang, 2012; Somervuori & Ravaja, 2013), surprisingly no re-
search has addressed the affective mechanisms through which consum-
er perceptions of the price discrimination tactic influence price
discrimination fairness judgments. The current paper addresses these
gaps by providing process evidence of the roles that familiarity, affect,
and fence-context fit play in determining price discrimination fairness
judgments.
2. Literature review
Price discrimination is designed to capture market surplus, which
exists when some consumers are willing to pay more than others for
the same product. The main motivation for firms to implement price
discrimination policies is the opportunity to reap large financial gains
(Agrawal & Ferguson, 2007), but such implementation does not come
without risks. While price discrimination is a well-known practice in
certain industries (e.g., airlines and hotels), the concept of charging dif-
ferent prices to different customers is largely perceived to be unfair by
most customers, and often assumed to be illegal, particularly in online
environments (Turow, Feldman, & Meltzer, 2005). Despite these con-
sumer perceptions, price discrimination is legal in most cases (provided
the implementation is not based on a “suspect category,” such as race).
Thus, many firms employ price discrimination strategies despite the risk
of negative customer reactions (Haws & Bearden, 2006; Ramasastry,
2005).
2.1. Consumer perceptions of price discrimination fairness and familiarity
When evaluating price fairness, consumers may consider two dis-
tinct components of the offer—the price and the strategy through
which the price is determined (Ferguson et al., 2013; Heyman &
Mellers, 2008). Both components weigh external information as a
strong or weak justification of the offer's pricing, but the critical infor-
mation in each process varies. Distributive fairness deals with how fair
consumers perceive the price to be when compared relative to others'
prices, retailer costs, or retailer profit (Bolton & Alba, 2006; Campbell,
1999; Ferguson et al., 2013; Kahneman et al., 1986a, 1986b; Xia et al.,
2004) and how these prices are justified to all consumers by the seller
(Bolton & Alba, 2006; Bolton et al., 2003; Campbell, 2007). Essentially,
this comparison explores whether the price is fair relative to other
prices, costs and overall value.
When consumers evaluate the price-setting strategy, they assess
whether the seller has violated social or industry norms of what consti-
tutes a fair rule (Heyman & Mellers, 2008; Maxwell, 2002). If the pricing
rule (e.g., price discrimination strategy) is viewed as fair, a price is
deemed fair (Dickson & Kalapurakal, 1994), which can have a positive
effect on purchase intentions (Campbell, 1999; Kukar-Kinney, Xia, &
Monroe, 2007). In contrast, a price discrimination policy that is seen
as unfair or a violation of community rules can lead to negative implica-
tions for the seller (Heyman & Mellers, 2008; Maxwell, 2002). Thus, rate
fences, defined as “rules that a company uses to determine who gets
what price and can be used to help differentiate one transaction from
another,” (Kimes & Wirtz, 2003, page 128) are of critical importance
to any company implementing price discrimination strategies.
Consumers process a multitude of reference prices and reference
transactions and compare them to a normative social standard when
evaluating price fairness (Kahneman et al., 1986a, 1986b). However,
as knowledge structures related to price discrimination strategies de-
velop over time, these social and industry norms are constantly evolv-
ing. Additionally, differential Price Tactic Persuasion Knowledge
(PTPK; Hardesty, Bearden, & Carlson, 2007; Pillai & Kumar, 2012) may
also be important in determining consumer response. In support of
the notion of knowledge evolution, price discrimination research finds
that the more familiar a practice becomes either through more wide-
spread use or a longer-lived implementation in an industry, the fairer
2635
the practice is viewed (Kimes, 1994; Kimes & Noone, 2002; Kimes &
Wirtz, 2003). Consistent with these findings, the first hypothesis is:
H1. : The familiarity of a rate fence will have a positive effect on percep-
tions of price discrimination fairness.
2.2. The potential role of fit in price discrimination fairness
Every rate fence is based upon a variable of discrimination (VOD),
defined as the specific attribute (gender, purchase time, usage time,
temperature, etc.) that is used to determine differential prices between
customers. One limitation of previous price discrimination research is
that existing manipulations of rate fences often confound VOD
(e.g., discrimination by seat location) with retail context (e.g., a sporting
event). Specifically, a VOD is typically paired with the retail context
most familiar to consumers (e.g., discrimination by seat location at a
sporting event), rather than manipulating each variable independently.
For example, discrimination by seat location could be presented with a
variety of retail contexts, both familiar (e.g., a Broadway theater) and
unfamiliar (e.g., a fast-food restaurant). Yet, by examining only those
combinations of VOD and retail context that demonstrate the best “fit”
as perceived by consumers, the extant research has ignored the possibil-
ity of interactive effects between the two variables.
As defined across several areas of marketing research (e.g., brand ex-
tensions, cause-related marketing, celebrity endorsements), fit occurs
between two objects or entities when an overlap between their concep-
tual or perceptual attributes exists (Park, Milberg, & Lawson, 1991;
Kirmani & Shiv, 1998; Bridges, Keller, & Sood, 2000; Pracejus & Olsen,
2004; Kuo & Rice, 2015). This paper posits that fit between a rate fence's
VOD and retail context occurs when overlap exists between (a) the rate
fence's VOD (e.g., time, color or temperature), and (b) the decisional
criteria most relevant in the retail context (e.g., ice cream shop, clothing
store, or theater). For example, the time at which a show begins is an
important consideration for consumers purchasing theater tickets, and
the current temperature will likely impact a consumer's decision to pur-
chase a frozen dessert such as ice cream. As such, rate fences that exhibit
a high degree of fit between VOD and retail context (i.e., fence-context
fit) are often the combinations most familiar to consumers.
Although the construct of fit has not yet been investigated within the
price discrimination literature, the broader consumer behavior litera-
ture documents the impact of fit on consumer attitudes. For example,
greater degrees of fit between the attributes of a firm and potential
brand extension (e.g., brand image, user base, function) lead to more fa-
vorable evaluations of the extension (Park et al., 1991; Bridges et al.,
2000; Albrecht, Backhaus, Gurzki, & Woisetschläger, 2013). Similarly, a
good fit between a celebrity and firm positively impacts spokesperson
efficacy (Kahle & Homer, 1985; Kirmani & Shiv, 1998; Rifon, Choi,
Trimble, & Li, 2004; Kang & Herr, 2006; Rice, Kelting, & Lutz, 2012),
and a good fit between a firm and charity increases participation inten-
tions during a cause-related marketing campaign (Pracejus & Olsen,
2004; Rifon et al., 2004; Kuo & Rice, 2015). Most often, fit exerts positive
influence through affective mechanisms that increase fluency (Kuo &
Rice, 2015), reduce skepticism (Rifon et al., 2004), or allow for associa-
tive transfer (Dimofte & Yalch, 2011). Given the robust effects of fit
across various domains of consumer research, the authors propose
that fence-context fit will positively impact perceptions of price dis-
crimination fairness, even in situations where the VOD is unfamiliar to
consumers (e.g., temperature-based discrimination). Conversely, the
positive effects of familiarity may be negated when fence-context fit is
judged to be poor by consumers. Formally:
H2a. : Fence-context fit will have a positive effect on perceptions of
price discrimination fairness.
H2b. : Fence-context fit will moderate the effects of familiarity on per-
ceptions of price discrimination fairness.
2636 A. Kuo et al. / Journal of Business Research 69 (2016) 2634–2640
2.3. The role of suspicion on price discrimination fairness
Suspicion has been defined in the literature as a “person's simulta-
neous state of cognitive activity, uncertainty and perceived malintent
about underlying information” (Bobko, Barelka, Hirshfield, & Lyons,
2014, p. 336), which can influence price discrimination fairness and
price fairness in general (Campbell, 1999; Ferguson et al., 2013). Both
the persuasion knowledge model (PKM; Friestad & Wright, 1995) and
the Defensive Suspicion Model (DSM; Darke & Ritchie, 2007) include
suspicion as a critical determinant of judgments. Both of these models
are dual-process models that allow suspicion to influence consumers
through a deliberative central path or a heuristic-based, automatic pro-
cess. The more obvious the motive, the more likely a consumer is to use
the persuasion knowledge through a deliberate path in a judgment
(Campbell & Kirmani, 2000; Hardesty et al., 2007). When a firm blatant-
ly acts in violation of industry norms, consumers are more likely to no-
tice and become suspicious of the firm's motives, which negatively
impacts overall perceptions of price fairness (Ferguson, Ellen, &
Piscopo, 2011; Ferguson et al., 2013). Conversely, when a firm's pricing
policy is perceived as less suspicious, the perceived value of the offer can
increase (Darke, 2010).
Previous research on consumer suspicion finds that fit impacts con-
sumer perceptions of firm motives. For example, the cause-related mar-
keting literature finds that a poor fit between a firm and cause leads
consumers to question a firm's motivations for sponsoring the charity,
thereby reducing participation intentions (Rifon et al., 2004). Likewise,
poor fit between a VOD and retail context may increase suspicion by
drawing attention to a firm's motivations for price discrimination
(e.g., profit maximizing). Consequently, suspicion can increase negative
affect toward the company (Ferguson et al., 2011), and prior research
demonstrates that such emotional factors can influence evaluations of
price fairness (Xia et al., 2004). Thus, the authors posit that poor
fence-context fit negatively impacts evaluations of price discrimination
fairness by increasing suspicion toward firm motives and generating
negative affect.
H3. : The effect of fence-context fit on price discrimination fairness will
be mediated by suspicion and affective response.
3. Study 1
3.1. Familiarity and fence-context fit pre-test
Familiarity and fit pretests were employed to evaluate the variables
of discrimination (VOD) utilized in Study 1. The familiarity pre-test
employed a 2-cell (VOD: temperature, time) within-subjects design. Par-
ticipants were exposed to pricing scenarios describing temperature-
based and time-based rate fences and asked to indicate their familiarity
with each of the strategies. While temperature is not common as a
VOD, its use is not unheard of, making it a realistic option that a consum-
er may encounter. For example, within the last few years, the tempera-
ture has led to differential pricing in restaurants (Zerehi, 2015;
Lampasona, 2015), museums (Corrigan, 2015), and in clothing retailers
(Hiscock, 2015; Tencer, 2015). The familiarity measure consists of a
two-item 7-point scale (1, very unfamiliar–7, very familiar, never–very
often, α = .87) adapted from Wirtz and Kimes (2007). Forty-two partic-
ipants at a large southern university completed the pretest for course
credit in an undergraduate business class. A paired-sample t-test re-
vealed that time-based discrimination was more familiar (M = 5.4,
SD = 1.68) than temperature based discrimination (M = 3.3, SD =
2.02), t(41) = 6.35, p b .01.
The fence-context fit pre-test employed a 2 (retail context: ice
cream, theater; between-subject) × 2 (VOD: temperature, time;
within-subject) design. Participants were exposed to one of the
companies chosen at random and asked to evaluate the fit between
the company (retail context) and the variables of discrimination
(i.e., temperature and time). The fence-context fit measure consists of
a three-item 7-point scale (1, not compatible–7, compatible, not a
good fit–a good fit, not congruent–congruent, α = .96) adapted from
Rifon et al. (2004). Thirty-five participants at a large southern university
completed the pretest for course credit in an undergraduate business
class.
A two-way ANOVA on the fence-context fit measure with retail con-
text as a between-subjects factor, VOD as a within-subjects factor, and
perceived fence-context fit as the dependent variable reveals a signifi-
cant interaction between retail context and VOD, F(1, 33) = 29.92,
p b .01. Specifically, temperature-based discrimination exhibited a
greater degree of fit with the ice cream context (M = 4.1, SD = 1.47)
as compared to the theater context (M = 2.9, SD = 1.77), F(1, 33) =
5.50, p b .05. In contrast, time-based discrimination exhibited a greater
degree of fit with the theater context (M = 5.6, SD = 1.15) as compared
to the ice cream context (M = 2.7, SD = 1.39), F(1, 33) = 36.91, p b .01.
3.2. Method and design
Study 1 employed a 2 (familiarity: low, high) × 2 (fence-context fit:
low, high) factor between-subject design. In the low familiarity condi-
tion, high fit (low fit) was created by pairing temperature-based dis-
crimination with an ice cream (theater) context (see Appendix A). In
the high familiarity condition, high fit (low fit) was created by pairing
time-based discrimination with a theater (ice-cream) context.
One hundred sixty one undergraduate students at a large southern
university completed Study 1 for course credit. To control for variance
in preexisting levels of price and persuasion knowledge, participants
were randomly assigned across experimental conditions and told
that they would be evaluating new pricing strategies. After reading
the assigned pricing scenario (Appendix A), participants completed a
survey collecting dependent measures. The price discrimination fair-
ness measure consists of a 7-point differential item (In your opinion,
how fair is [Company]'s pricing policy?; 1, very unfair–7, very fair)
adapted from Campbell (1999), and the affective response measure
consists of six Likert-type items (angry, upset, uncomfortable, happy,
pleased, content; does not describe my feelings–clearly describes my
feelings; α = .90) adapted from Watson, Clark, and Tellegen (1988)
and Coulter (1998).
3.3. Results and discussion
A two-way ANOVA on perceived price discrimination fairness
with familiarity and fit as between-subject factors reveals a main effect
of familiarity, F(1, 160) = 8.32, p b .05, a main effect of fit, F(1, 160) =
35.78, p b .01, and a significant interaction between the terms,
F(1, 160) = 13.32, p b .01 (Fig. 1). To better understand the nature of
the interaction, the analysis examines a set of planned contrasts. In
the high fit condition, participants perceive the high familiarity condi-
tion (M = 5.4, SD = 1.31) to be more fair than the low familiarity con-
dition (M = 3.7, SD = 1.70), F(1, 160) = 21.22, p b .01. In the low fit
condition, however, participants perceive no difference in fairness be-
tween the high (M = 2.9, SD = 1.94) and low (M = 3.1, SD = 1.46) fa-
miliarity conditions, F(1, 160) = .29, p = .59. In the high familiarity
condition, participants perceive the high fit condition to be more fair
than the low fit condition, F(1, 160) = 47.24, p b .01. In the low familiar-
ity condition, participants perceive the high fit condition to be margin-
ally more fair than the low fit condition, F(1, 160) = 2.67, p = .10.
In support of H1, H2a, and H2b, the results of Study 1 suggest that
fence-context fit moderates the positive effect of familiarity on judg-
ments of price discrimination fairness. Consistent with the extant liter-
ature (Kimes, 1994; Kimes et al., 2002; Kimes & Noone, 2002),
familiarity exerts a positive effect on judgments of price discrimination
fairness, but only when a high degree of fence-context fit exists. This
 A. Kuo et al. / Journal of Business Research 69 (2016) 2634–2640
Fig. 1. Study 1 — Price discrimination fairness judgments.
effect is not found when the fence-context fit is low, suggesting that fa-
miliarity cannot fully explain perceptions of fairness.
The specific mechanism by which fence-context fit affects percep-
tions of price fairness, however, is unclear as related literature suggests
two paths through which fit can act. In some instances, fit subconscious-
ly exerts a fluency-like effect that positively impacts affective response
(Kuo & Rice, 2015). Conversely, fit can also moderate the degree to
which consumers elaborate on firm motives, such that poor fit can
lead to skepticism (Rifon et al., 2004) when consumers question a firm's
motivations for sponsoring a charity. Within the pricing literature, pro-
cedural fairness refers to a consumer's assessment of a firm's price set-
ting practice with regard to social norms (Maxwell, 2002; Ferguson
et al., 2013). When a firm appears to act primarily in its own self-
interest without regard to other parties (i.e., a violation of procedural
fairness), consumers become suspicious of the firm's motives, which
negatively impacts overall perceptions of price fairness (Ferguson
et al., 2013). Similarly, poor fit can lead to negative affect (Dimofte &
Yalch, 2011), which itself can lead to increased skepticism (Forgas &
East, 2008).
In Study 1, participants may view time-based discrimination as less
fair in an ice cream retail context because the lack of retail-context fit in-
creases suspicion toward firm motives. In contrast, retail-context fit
may act as a subconscious, fluency-like cue that affects evaluations of
price discrimination fairness. To discriminate between these competing
explanations, Study 2 examines the mechanisms by which retail-
context fit exerts its influence.
4. Study 2
4.1. Method and design
Study 2 employed a 2 (VOD: temperature, time) × 2 (retail context:
ice cream, sandwich) factor between-subject design. In the VODTIME
condition, participants read a scenario describing a local eatery
(i.e., The Corner Shoppe) that applies a 5% surcharge to purchases
after 5 o'clock in the evening. In the VODTEMP condition, participants
read that The Corner Shoppe applies a 5% surcharge to purchases
when the temperature is above 95 °F. The experiment manipulates re-
tail context by describing The Corner Shoppe as selling either ice
cream (high fit with temperature) or sandwiches (low fit with
2637
temperature) in scenarios similar to those used in Study 1, with minor
changes for store name and product line in the sandwich conditions.
The participants consist of 96 undergraduate students at a large
southern university who participated in Study 2 for course credit. Partic-
ipants were randomly assigned across conditions and told that they
would be evaluating new pricing strategies. After reading the assigned
pricing scenario, participants filled out a survey collecting dependent
measures identical to those in Study 1 (fairness, perceived fence-
context fit, and affective response). In addition, participants indicated
their suspicion by responding to two Likert items (The Corner Shoppe
has an ulterior motive for their pricing tactics; The Corner Shoppe's
prices are suspicious, α = .89) adapted from Decarlo (2005).
4.2. Results and discussion
A two-way ANCOVA of price fence fairness with VOD and retail con-
text as between-subject factors and familiarity as a covariate reveals a
main effect of retail context, F(1, 91) = 10.10, p b .01, and a significant
interaction between the factors, F(1, 91) = 7.15, p b .01 (Fig. 2). The
main effect of VOD is not significant, F(1, 91) = .01, p = .94. To better
understand the nature of the interaction, the analysis examines a full
set of planned contrasts. In the VODTEMP condition, participants perceive
the ice cream context (M = 4.2, SD = 1.74) to be more fair than the
sandwich context (M = 2.1, SD = .90), F(1, 91) = 15.42, p b .01. In
the VODTIME condition, no significant differences exist between the ice
cream context (M = 3.3, SD = 1.74) and sandwich context (M = 3.2,
SD = 1.75), F(1, 91) = .14, p = .71. Participants perceive
temperature-based discrimination to be more fair than time-based dis-
crimination in the ice cream context, F(1, 91) = 3.80, p = .05, but not
the sandwich context, F(1, 91) = 2.13, p = .15.
A moderated mediation model with VOD as the independent vari-
able (0 = temperature, 1 = time), perceived price discrimination fair-
ness as the dependent variable, perceived fence-context fit, suspicion,
and affective response as the serial mediators, and retail context as the
moderating variable (on the a path) tests the roles of these factors on
price discrimination fairness (see Fig. 3). Consistent with H3, the indi-
rect effect of VOD → Fence-Context Fit → Suspicion → Affective
Response → Price Discrimination Fairness is significant in the ice
cream context (ad1d2d3b = −.08, 95% CI: −.22 to −.03), but not signif-
icant in the sandwich context (ad1d2d3b = .00, 95% CI: −.03 to .06). This
result suggests that, in the ice cream context, discriminating by time
2638 A. Kuo et al. / Journal of Business Research 69 (2016) 2634–2640

Fig. 2. Study 2 — Price discrimination fairness judgments.

(versus temperature) has (a) a negative impact on perceived fence-
context fit, which results in (b) an increase in suspicion, which
(c) negatively impacts affective response, which finally exerts (d) a neg-
ative effect on perceptions of price discrimination fairness.
5. General discussion
Consumers commonly experience the results of price discrimination
policies, whether through purchasing premium-priced last-minute air-
fare or benefiting from a lower price while attending a matinee at a local
theater. When implemented successfully, price discrimination policies
can result in sizeable revenue increases for firms (Hanks, Cross, &
Noland, 1992; Smith, Leimkuhler, & Darrow, 1992; Wirtz, Kimes,
Theng, & Patterson, 2003; Guadix, Cortés, Onieva, & Muñuzuri, 2010).
Although the broader price fairness literature details both the cognitive
and affective antecedents of price fairness judgments (Babin, Hardesty,
& Suter, 2003; Vaidyanathan & Aggarwal, 2003; Campbell, 2007), the
extant research does not address the unique role of fit in the evaluation
of price discrimination fairness. Yet, fit has been shown to be an
important factor in numerous areas such as product extensions (Park
et al., 1991; Bridges et al., 2000; Albrecht et al., 2013; Goedertier,
Dawar, Geuens, & Weijters, 2015), celebrity endorsements (Kahle &
Homer, 1985; Kirmani & Shiv, 1998; Rifon et al., 2004; Kang & Herr,
2006; Rice et al., 2012), and corporate social responsibility campaigns
(Pracejus & Olsen, 2004; Rifon et al., 2004; Lee, Park, Rapert, &
Newman, 2012). As such, the primary goal of the current research is
to clarify the role of fit within the context of price discrimination.
The results of two experiments suggest that familiarity positively
impacts perceptions of price discrimination fairness, but only when a
high degree of fence-context fit exists. In contrast, a greater degree of
fit positively impacts fairness judgments, even when familiarity is low.
Furthermore, the results of Study 2 shed light on the mechanisms by
which fence-context fit exerts influence on perceptions of price discrim-
ination fairness. As the degree of perceived fence-context fit decreases,
consumers become more suspicious of a firm's motives, which leads
to the instantiation of negative affect. As such, both cognitive and affec-
tive processes that contribute to the effect of fence-context fit on price
discrimination fairness exist.

Fig. 3. Study 2 — Serial mediation of effect of rate fence on price discrimination fairness by fence-context fit, suspicion and affect.
 A. Kuo et al. / Journal of Business Research 69 (2016) 2634–2640
From a managerial perspective, price discrimination practices are
coming under greater scrutiny, as several high profile companies have
drawn the ire of consumers. The ride-sharing service Uber, for example,
is heavily criticized for their surge pricing tactics—fares increase up to
six times their normal amount during peak commuting hours
(Kemedy, 2014). Price discrimination remains a lucrative method of
maximizing revenue, but managers must be wary of customers' scru-
tiny and potential backlash. This research indicates that consumers
are sensitive to fence-context fit when assessing the fairness of a
firm's price discrimination strategy. When fence-context fit is high,
consumers may respond favorably, even when the specific variable
of discrimination is unfamiliar. As such, firms must carefully consider
issues pertaining to fit when a price discrimination strategy is
employed.
6. Limitations and future research
With regard to issues of fit, this research offers potential avenues for
future research relating to price discrimination. Regulatory fit, for exam-
ple, examines the overlap between consumer motivations
(i.e., prevention vs. promotion) and outcomes (Higgins, 1998).
Khajehzadeh, Oppewal, and Tojib (2014) demonstrated that regulatory
fit can influence coupon redemption behavior—when a good fit exists
between orientation and framed outcomes, the consumer experiences
a “just-right” feeling that positively affects evaluations (Aaker & Lee,
2006). In the context of this research, prevention-focused consumers
may become more sensitive to the effects of message framing in a
price discrimination scenario. In contrast, promotion-focused con-
sumers may view any price discrimination policy as a prospective
discount regardless of message framing. Relatedly, Zdravkovic,
Magnusson, and Stanley (2010), identify several sub-dimensions of fit
that include perceptual fit (i.e., relatedness of perceptual attributes
such as color, size, or shape) and geographic fit (i.e., the extent to
which two entities occupy or operate in shared physical space or loca-
tion), which could influence price discrimination fairness. For example,
a company using a thermometer in its company logo can potentially es-
tablish perceptual fit with a temperature-related rate fence in the ab-
sence of conceptual fit.
In the execution of this research, a few limitations are worth noting.
First, participants in both studies were drawn largely from a pool of stu-
dents studying business at a large university. Although the sample con-
tains diversity across many individual difference characteristics (age,
race, gender, income, etc.), overstating the generalizability of findings
is problematic when an experimental sample does not adequately rep-
resent the entire consumer population (Babin, Griffin, & Hair, 2015). As
such, the findings will generalize most directly to university students
with business experience. Evaluating the fairness of pricing strategies,
however, is a process regularly engaged by consumers (Xia et al.,
2004), and thus, the effects of fence-context fit would be expected to
generalize more broadly to U.S. consumers who possess similar experi-
ence and knowledge as the student sample. Furthermore, specific con-
sumer characteristics may enhance or mitigate these effects. For
example, knowledge and familiarity with the product category may be
important, as assessing fence-context fit requires a basic understanding
of key decisional criteria. The impact of differential product or pricing
knowledge on the generalizability of the findings, however, can only
be assessed through further investigation. Secondly, as the paper focus-
es exclusively on third degree price discrimination, the results may not
hold for first and second degree price discrimination. However, given
the wide variation that exists amongst third degree price discrimination
tactics, the number of unique factors to explore is constantly expanding.
In addition to the aforementioned types of fit (fence-context, regulato-
ry, perceptual, etc.), exploring other factors that make consumers less
apt to scrutinize a price discrimination tactic (e.g., familiarity with the
retailer) provides promising opportunities for future research.
2639
Appendix A. Price fence scenarios
Study 1
Low familiarity High familiarity
Low fit The Main Street Theater is a local The Sweet Shoppe is an ice cream
playhouse that brings nationally store that serves a variety of
touring shows to the community. traditional and unique flavors. The
The price of tickets is adjusted price of their ice cream is adjusted
based on the current temperature. based on the time of purchase.
When the temperature is above When purchasing ice cream after
95° (F), a 5% surcharge is added to 5 pm, a 5% surcharge is added to
the purchase price. the purchase price.
High fit The Sweet Shoppe is an ice cream The Main Street Theater is a local
store that serves a variety of playhouse that brings nationally
traditional and unique flavors. The touring shows to the community.
price of their ice cream is adjusted The price of tickets is adjusted
based on the current temperature. based on time of the show. For
When the temperature is above shows starting after 5 pm, a 5%
95° (F), a 5% surcharge is added to surcharge is added to the
the purchase price. purchase price.
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