Culture, Relationship Norms, and Dual Entitlement

Abstract

According to the dual entitlement principle, consumers find it fair for firms to price asymmetrically to cost changes-that is, for firms to increase prices when costs increase but maintain prices when costs decrease. However, a meta-analysis reveals asymmetric pricing is less prevalent in collectivistic (vs. individualistic) countries (study 1). We propose a fairness-based explanation, demonstrating that interdependent consumers in collectivistic cultures perceive asymmetric pricing to be less fair than do independent consumers in individualistic cultures (studies 2, 4, and 5). We attribute this cultural variation to culture-specific relationship norms. Specifically, we argue that while the practice of asymmetric pricing is consistent with the exchange norms among independent consumers that emphasize self-interest pursuit, it is inconsistent with the communal norms among interdependent consumers mandating firm benevolence. Supporting this argument, we find that (a) directly manipulating communal (vs. exchange) norms yields similar differences in fairness perceptions that mimic those due to culture (study 3), (b) the cultural differences are mediated by the communal mandate for firm benevolence (study 4), and (c) the cultural differences are mitigated when a firm frames asymmetric pricing as benevolent (study 5). We conclude by discussing the theoretical and managerial implications of these findings.