Perceived fairness towards airlines using online first-degree price discrimination as a pricing strategy

Abstract

Big data enables first-degree price discrimination, which allows firms to better match supply with demand and to achieve a finer customer segmentation. The opportunity of implementing first-degree price discrimination has overshadowed the potential concerns. One of these concerns are consumer perception. Although literature has abundantly discussed price discrimination, literature on first-degree price discrimination have been scares. There is also very little literature that focus on the perceptions that are formed when first-degree price discrimination gets implemented in the airline industry. This study explores the passengerÕs perception regarding South African airlines using online price discrimination strategies. Through an exploratory study, the student studied the consumersÕ reaction and perception towards first-degree price discrimination in one particular industry, the airline industry, in South Africa. Furthermore, as big data enables first-degree price discrimination, the student explored the level of knowledge there is with regards to big data. The intent of the research was to identify how passengers currently perceive price discrimination strategies, as well as to understand and identify how passengers will react to airlines using big data analytics as an enabler to use first-degree price discrimination. The key findings supported literature that airline passengers have become accustomed to current first-degree price discrimination and revenue management. Perceptions changed once airlines used personal data to enable first-degree price discrimination. It was determined that price transparency could result in immediate acceptance of first-degree price discrimination tactics. However, a ÔÔPerceived Fairness of First-Degree Price Discrimination for AirlinesÕ model arose which allows a better understanding of the complexity of perceives fairness. The findings from this research adds to the existing literature on first-degree price discrimination and perceived fairness. It also contributes to literature in the airline industry.