The central role of price fairness for cost transparency strategy: What is the effect of conventional versus Fairtrade products and construal level?

Abstract

Insufficient information and understanding regarding a product’s price components can lead to negative perceptions of the fairness of the price and subsequent negative behaviors toward the product. Cost transparency is a way to disclose these components and enhance price fairness and, in turn, behaviors. Previous research rarely tests the role of price fairness in the cost transparency process and limits itself to studying conventional products without considering other product types (e.g. Fairtrade products). Moreover, the moderating effect of consumers’ characteristics (such as the construal level) is also lacking. To fill these gaps, we run two online experiments. We find that price fairness fully mediates the cost transparency–purchase intention relationship. We further find that this effect is stronger for Fairtrade products than for conventional products and that this enhanced effect is stronger for consumers with high construal level compared to consumers with low construal level. We discuss theoretical and managerial implications.