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Abstract

There is growing public concern about the 'unfairness' of many pricing practices that have become common in consumer, particularly digital, markets. Industrial and behavioural economists have developed theories that explain the conditions under which these practices are profitable for firms, and their implications for consumer welfare. We identify a mismatch between the welfare economic principles used in this theoretical work and the normative perspective in which these practices are viewed as unfair. We develop a concept of 'transactional fairness', grounded in the normative approach of Sugden's Community of Advantage, that is reflective of public concerns. Transactional fairness is complementary to established criteria of economic efficiency and distributional equity but is based entirely on the relationship between individual buyers and sellers. It establishes clear principles with realistic information requirements that are appropriate for compliance by firms. Regulation based on this approach can help to restore public faith in markets.

Original languageEnglish
JournalBehavioural Public Policy
Early online date11 Aug 2023
DOIs
Publication statusE-pub ahead of print - 11 Aug 2023

Keywords

  • unfair pricing
  • consumer protection
  • transactional fairness
  • digital regulation
  • behavioural welfare economics

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