Transactional fairness and pricing practices in consumer markets

Bruce Lyons and Robert Sugden
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Bruce Lyons: Centre for Competition Policy and School of Economics, University of East Anglia

No 2021-03, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

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 buyer and seller. 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.

Keywords: Price discrimination; unfair pricing; consumer law; competition policy (search for similar items in EconPapers)
JEL-codes: D61 D63 K21 K23 L40 L51 (search for similar items in EconPapers)
Date: 2021-01-28
New Economics Papers: this item is included in nep-com, nep-law and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2021_03

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