How Do Price Fairness Perceptions Differ Across Culture? LISA E. BOLTON HEAN TAT KEH DO NOT COPY JOSEPH W. ALBA*

Transcription

1 How Do Price Fairness Perceptions Differ Across Culture? 1 LISA E. BOLTON HEAN TAT KEH JOSEPH W. ALBA* * Lisa E. Bolton is associate professor of marketing, The Pennsylvania State University ([email protected]). Hean Tat Keh is associate professor of marketing, Guanghua School of Management, Peking University ([email protected]). Joseph W. Alba is distinguished professor of marketing, Warrington College of Business, University of Florida ([email protected]). The authors gratefully acknowledge funding support from the Guanghua-Wharton Joint Research Initiative on Firms and Markets in China. This research was also funded in part by the National Natural Science Foundation of China (Grant No ) awarded to Hean Tat Keh. Correspondence: Lisa E. Bolton, Associate Professor of Marketing, The Pennsylvania State University, University Park, PA

2 2 How Do Price Fairness Perceptions Differ Across Culture? ABSTRACT This research investigates the effects of across-consumer price comparisons on perceived price fairness as a function of culture. Collectivist (Chinese) consumers are shown to be more sensitive to in-group versus out-group differences than are individualist (American) consumers. The collectivist perspective orients consumers toward the in-group and heightens concerns about face (i.e., status earned in a social network) that arise from in-group comparisons. Process evidence for the causal role of cultural differences is also provided via manipulated selfconstrual and measurement of the emotional role of shame evoked by face concerns. Finally, robustness is tested utilizing an alternative operationalization of the in-group/out-group distinction that extends the findings to the context of firm relationships. Keywords: Price Fairness, Culture, Face, Emotions, Individualism/Collectivism

3 3 A fundamental contribution of consumer research to the issue of pricing is the discovery that price perceptions are as much a matter of psychology as economics. A large proportion of this research has demonstrated how simple framing manipulations can influence perceived value or affordability of a product. A much smaller but developing stream of research has examined perceived fairness (see Xia, Monroe, and Cox 2004). Not unlike the broader literature, research on price fairness has examined how reference points affect perceptions including those that enable comparisons to a vendor s competitors and its own costs and historical prices (Bolton, Warlop, and Alba 2003). Most recently, Haws and Bearden (2006) examined fairness response to differential pricing across consumers. They demonstrated that paying a higher price than another customer (for the same product from the same vendor at the same time) leads to particularly strong perceptions of unfairness relative to price differences across products, vendors, or time. The present research uses this observation as a starting point for understanding an issue that has received little empirical attention but is rapidly growing in importance due to the increasing ability of mass marketers to price discriminate based on individual consumers price sensitivity and the growing availability of price information posted by other consumers on the internet (e.g., TripAdvisor and similar web sites). We examine how consumers judge fairness when the price of an identical good is not uniform across customers but do so from a crosscultural perspective. Cross-cultural research has probed various aspects of consumer behavior but is scant with regard to price fairness. The present research addresses this issue by contrasting price fairness perceptions in two dominant economies China and the United States and, in so doing, responds to calls for research on emerging markets (Burgess and Steenkamp 2006). CROSS-CULTURAL DIFFERENCES IN INDIVIDUALISM/COLLECTIVISM The impetus for examining across-consumer price comparisons as a function of culture is

4 4 the natural supposition that the way in which consumers react to the prices paid by others is influenced by culture-driven differences in social relationships and self-definition. In the Chinaversus-USA comparison, these differences are most frequently articulated and investigated in terms of the individualism/collectivism distinction. This distinction has been viewed as an individual difference variable (independent/interdependent self-construal) and is one of multiple dimensions along which cultures are purported to vary (e.g., Hofstede 1980). Although not without its critics (e.g., Brewer and Chen 2007; Oyserman, Coon, and Kemmelmeier 2002), the distinction robustly ascribes higher collectivism (individualism) to Chinese (American) culture. Whereas Western cultures tend to define the self in terms of individual autonomy (i.e., that individuals are independent of one another), Eastern cultures define the self in terms of social connectedness (Markus and Kitayama 1991). The latter orients the Chinese, as collectivists, toward in-groups and away from out-groups due to the in-group s greater selfrelevance (Oyserman 1993; Oyserman, Coon, and Kemmelmeier 2002). Indeed, the Chinese are said to view the world as based on a network of relationships (Nisbett et al. 2001, p. 241), which suggests a greater sensitivity to relationship context. For example, Americans report treating friends, coworkers, and business owners equivalently, whereas Chinese are more sensitive to group membership (Hui, Triandis, and Yee 1991). Moreover, people high in collectivism are biased in favor of their in-group (Chen, Brockner, and Katz 1998) and, as Brewer and Chen (2007, p. 137) note, collectivists often show less consideration than do individualists for the welfare of strangers strangers who might be considered part of a collective in-group in a broader sense of the word. By varying the nature of the across-customer comparison (via in-group versus out-group comparisons), the present research investigates how cultural differences in individualism/collectivism affect price fairness reactions.

5 5 Researchers have also proposed that individualist and collectivist cultures differ in terms of sensitivity to face. For present purposes, face is defined as status earned in a social network (cf. Ho 1976), and therefore gain or loss of face corresponds to a gain or loss in social status. (This definition corresponds to mianzi or 面 子, which is face achieved through social status, rather than lian or 脸, which is face achieved through society s confidence in one s moral character.) Prior research suggests that collectivist cultures are more concerned with face, scoring higher on measures of face-concern (Zane and Yeh 2002; Oetzel and Ting-Toomey 2003) or face-consciousness (Bao, Zhou, and Su 2003). Ho (1976) suggests that the concept of face is of Chinese origin, and researchers have noted that the Chinese language has more words for concepts related to face (such as losing face and the emotions related to a loss of face) than does the English language (Ho, Fu, and Ng 2004; Bedford 2004; Hu 1944). In interpersonal conflict settings, the Chinese report greater concern for face (both own and other s) than do Americans (Oetzel and Ting-Toomey 2003; Oetzel et al. 2001). Moreover, loss of face had a stronger negative impact on relationships for Hong Kong Chinese than for Americans (Kam and Bond 2008). Indeed, Chang and Holt (1994, p.111) argue that face and interpersonal relating cannot be separated from each other ; that is, face is inextricably linked to the social network in Chinese culture. Although face has been associated with consumer behavior e.g Li and Su 2007), past research is scant in general and nonexistent with regard to price perceptions. Our fundamental assertion is that cultures that differ in concern over face will, as a result, also differ in their responses to across-customer price differences. Paying a different price from others summons concern about face such that consumers gain face when paying a lower price than another consumer and lose face when paying a higher price than another consumer. 1 In a

6 6 collectivist (Chinese) culture, consumers are oriented toward the in-group, and therefore face concerns are stronger for in-group than out-group comparisons. Put simply, the gain (loss) in face of paying less (more) than another consumer is greater for in-group than out-group comparisons. Thus, collectivist (Chinese) consumers should experience a greater loss of face when a friend pays a lower price than when a stranger pays a lower price. (Similarly, collectivist/chinese consumers should experience a greater loss of face when paying a higher price to a vendor with whom they have a long-term relationship than to a newly encountered vendor.) In contrast, face concerns among individualist (American) consumers are not expected to differ between in-group and out-group comparisons. In a series of studies we investigate how cultural differences affect price fairness reactions to across-customer price differences. Study 1 provides an initial test by examining price fairness judgments by individualist (American) and collectivist (Chinese) consumers who pay a higher or lower price than an in-group or out-group member. Studies 2-4 provide evidence for psychological process. Special effort is made to determine the causal role of culture through a manipulation of self-construal (study 2) and measurement of the emotional role of shame evoked by face concerns (study 3). Finally, study 4 tests the robustness of the phenomena, utilizing an alternative operationalization of the in-group/out-group construct to extend our findings from customer relationships to customer-firm relationships. Figure 1 provides an organizational framework that delineates the key constructs and inter-relationships that comprise the research. [Insert Figure 1 about here] STUDY 1: PRICE COMPARISONS ACROSS FRIENDS VERSUS STRANGERS We begin with an empirical test of the fundamental proposition that Chinese/collectivists will react more strongly than will Americans/individualists to in-group versus out-group

7 7 comparisons when judging price fairness. Study 1 examined the case in which consumers compare the price they paid to the price paid by a referent customer, instantiated as either a friend (in-group) or a stranger (out-group). We naturally expect fairness judgments to be lower (higher) when the price paid is higher (lower) than another customer s price. However, we also expect Chinese consumers to be more sensitive than American consumers to relational context as it pertains to in-group/out-group (friend/stranger) distinctions. In particular, Chinese consumers (as collectivists oriented toward the in-group), due to their concerns about face, should react more strongly to a price differential across customers when the referent is a friend than when the referent is a stranger. American consumers (as individualists) should be relatively less affected by whether the customer paying a different price is a friend or stranger. Formally, H1: When judging price fairness, Chinese/collectivists will react more strongly to ingroup versus out-group price comparisons than will Americans/individualists. Hypothesis 1 predicts a three-way interaction of culture, price comparison, and in-group/outgroup (operationalized as friend/stranger). Consumers should judge it more unfair (fair) when charged a higher (lower) price than another customer. Chinese consumers should react more strongly to price comparisons involving friends than strangers; American price fairness reactions should differ across friends and strangers to a lesser degree. Method Subjects and Design. The experiment was a 2 (Price comparison: higher vs. lower) x 2 (Referent: In-group vs. out-group) x 2 (Culture: Chinese vs. American) between-subjects design. Participants were undergraduate students from leading universities in China and the United States (both screened to omit non-native participants and Asian-Americans) who received financial payment for participating in the study. A total of 334 individuals participated. Materials and procedure. Participants read a short scenario in which price comparison

8 8 and referent were manipulated. The American version (with manipulations shown in square brackets) read as follows: You are shopping for a shirt. You find one that you like in a store and pay [$29.95 / $39.95] for it. You subsequently see a [stranger / close friend] and you are both wearing the same shirt (same brand, same quality, same style). You learn that [this stranger / your friend] paid [$39.95 / $29.95] for the shirt. It was bought at the same time from the same store. In the Chinese version, prices were set at 119 and 159 (based on local market base prices and an equivalent percentage price difference). After reading the scenario, participants responded to the question How fair is the price that you paid? on three seven-point scales anchored by unfair / fair, not at all just / just, and unreasonable / reasonable. After an open-ended thought-listing task, participants responded to background questions that included Singelis (1994) independent/interdependent self-construal scale (utilized as an individual-difference measure of individualism/collectivism). In all experiments, study materials were translated into Chinese and then verified by back-translation using two translators unaware of the hypotheses. Results A fairness index was constructed by averaging the three fairness questions (coefficient α =.92 in China,.91 in the USA). An ANOVA performed on this index revealed main effects of culture (F(1, 326) = 18.73, p <.01) and price comparison (F(1, 326) = , p <.01), the twoway interaction of culture and price comparison (F(1, 326) = 4.35, p <.05), and, moreover, the predicted three-way interaction of culture, referent, and price comparison predicted in H1 (F(1, 326) = 3.95, p <.05). To understand the nature of the three-way interaction, follow-up tests were conducted for each cultural sample. The American sample revealed only a main effect of price comparison (F(1, 152) = 87.83, p <.01; all other F s < 1). As the pattern in figure 2 reflects, fairness was perceived as less

9 9 (more) fair when the comparative reference price was lower (higher). In the Chinese cultural sample, however, the main effect of price comparison (F(1, 174) = 37.37, p <.01) was qualified by its interaction with the referent (F(1, 174) = 5.54, p <.05). Consistent with H1, the interaction reflects a larger fairness difference between the higher and lower price conditions when the referent was a friend (F(1, 174) = 35.44, p <.01) than a stranger (F(1, 174) = 7.15, p <.01). Put differently, the Chinese were less affected by what a stranger paid than what a friend paid whereas Americans were uniformly sensitive to price discrimination. [Insert Figure 2 about here] To reinforce these conclusions, alternative analyses were conducted that substituted an individual-difference variable for nationality. Indices were constructed by averaging the scale items for independent (coefficient α =.68) and interdependent self-construal (coefficient α =.76). As a matter of cultural confirmation, the Chinese sample indeed scored higher than the American sample on interdependence (M American = 4.65 (.71) vs. M Chinese = 5.31 (.63); F(1, 330) = 81.34, p <.01) but did not differ on independence (M American = 4.69 (.71) vs. M Chinese = 4.65 (.72); F < 1). An ANOVA using the standardized interdependence score (M = 0, SD = 1) again revealed the predicted three-way interaction of interdependence, referent, and price comparison (F(1, 324) = 3.49, p =.06). [For completeness, effects of price comparison (F(1, 324) = , p <.01) and price comparison X interdependence (F(1, 324) = 3.01, p =.08) also emerged.] As the coefficient of the interdependence covariate nested within each condition indicates, interdependence had no effect when a friend paid a different price (b higher = -.09 (0.18), t = -.49, p =.63; b lower = -.06 (.19), t = -.33, p =.74) but did affect fairness judgments when a stranger paid a different price (b higher =.29 (.15), t = 1.92, p =.06; b lower = -.32 (.16), t = -2.01, p <.05). That is, all subjects were sensitive to in-group or friend comparisons but interdependence determined

10 10 whether out-group or stranger comparisons affected fairness response consistent with H1. Discussion Together, these results show cultural variation in fairness perceptions arising from acrosscustomer comparisons. Cultural variation was examined at the group level (via cross-national comparisons) and at the individual level (via measured self-construal). Paying a higher (lower) price than another customer was deemed unfair (fair); moreover, Chinese/collectivists were more sensitive to in-group versus out-group comparisons than were American/individualists. The data support an explanation whereby collectivists are oriented toward relationships and therefore more sensitive to price comparisons that evoke self-relevant in-groups. (Individualists are relatively insensitive to the in-group/out-group distinction.) For Chinese consumers, we argue that the loss (gain) of face when paying a higher (lower) price is greater for comparisons to a friend than a stranger. In contrast, American consumers (as individualists) are relatively less affected by whether the customer paying the different price is a friend or stranger. Prior research on fairness and culture has largely focused on the contexts of negotiation and reward allocation. For example, it has been shown that individualists use an equity rule in reward allocation regardless of the group membership of their interaction partner; in contrast, collectivists use an equality (equity) rule when interacting with an in-group (out-group) member (e.g., Leung and Bond 1984; Hui, Triandis, and Yee 1991). These results have been attributed to the collectivist value of harmony or duty to the in-group. However, other research argues that these results do not obtain when the allocator is not also a recipient of the reward (Fischer and Smith 2003; Leung 1997; Chen 1995). The allocator role in a pricing context is a third party (the vendor, not the customer), which casts doubt on the relevance of much prior work. Our findings support neither a harmony- nor a duty-based explanation. In fact, our results run counter to both.

11 11 We observe that an egocentric bias in fairness response is enhanced, not attenuated, when collectivists make price comparisons to in-groups versus out-groups. These results are consistent with a face explanation and, more generally, point to the need for a more expansive understanding of fairness and culture that can accommodate pricing contexts. STUDY 2: THE ROLE OF SELF-CONSTRUAL The overarching objective of studies 2 and 3 is to provide more direct evidence for the psychological process that underlies H1. To begin, we provide further evidence for the role of culture. Although study 1 points to the moderating role of culture operationalized at a national level, it is not our contention that price fairness perceptions are invariant within a culture. Indeed, research suggests that the self can be viewed as either an independent entity, distinct from others, or as an interdependent entity, connected to others; moreover, these competing construals may co-exist within an individual (Brewer and Gardner 1996). Supporting evidence comes from research that selectively primes each construal and produce effects consistent with culture-based observations (e.g., Ng and Houston 2006). In the present study we adopt the priming approach in order to draw firmer conclusions regarding causality by controlling for the myriad differences that exist across cultures, including differences in the marketplace itself. Study 2 separately primed independent and interdependent self-construals and then measured the effects of across-customer price comparisons on perceived fairness and repurchase intentions, all within an American sample. Consistent with H1, we expect that consumers with an accessible interdependent self-construal should react more strongly to a price comparison when the referent is an in-group versus out-group member; consumers with an accessible independent self-construal should be relatively less affected by the nature of the referent. Formally, H2: When judging price fairness, consumers primed with an interdependent selfconstrual will react more strongly to in-group versus out-group price comparisons

12 12 than will consumers primed with an independent self-construal. H2 predicts a three-way interaction of self-construal, price comparison, and in-group/out-group (operationalized as friend/stranger). Consumers should judge it more unfair (fair) when charged a higher (lower) price than another customer. Consumers primed with an interdependent selfconstrual should react more strongly for price comparisons to friends than strangers, inasmuch as friends are a more potent source of gain/loss of face. Reactions of consumers primed with an independent self-construal should differ across friends and strangers to a lesser degree. That is, we expect that the cross-cultural effects of individualism/collectivism observed in study 1 will be replicated within-culture via priming of independent/interdependent self-construal. As a secondary objective, the present study also investigated repurchase intentions. Consistent with H2, we hypothesize a three-way interaction of self-construal, price comparison, and in-group/out-group on repurchase intentions. Consumers primed with an interdependent selfconstrual should be more (less) likely to repurchase after paying a lower (higher) price than another customer, especially when the other consumer is a friend. Consumers primed with independent self-construal should be less sensitive to the friend-stranger distinction. Consistent with prior research, we expect perceived fairness to mediate the effects on repurchase intentions. Method Subjects and Design. The experiment was a 2 (Price comparison: higher vs. lower) x 2 (Referent: in-group vs. out-group) x 2 (Prime: interdependent vs. independent self-construal) between-subjects design. Participants were undergraduate students from the United States who received financial payment or course credit for participating in the study. A total of 188 individuals participated. Materials and Procedure. Borrowing from prior research (Aaker and Williams 1998; Ng

13 13 and Houston 2006), participants were first exposed to an advertisement for a travel website designed to prime either an independent or interdependent self-construal. In the independent selfconstrual condition, the ad featured a single individual walking along the beach. The text (header, text, and footer) read: Escape the ordinary. We supply the sand and sun. The rest is up to you. Visit simplicitytravel.com for more information about creating your own getaway experience. Simplicity Travel: Where getting away from it all matters most. In the interdependent self-construal condition, the ad featured two adults and two children holding hands along the beach. The text (header, text, and footer) read: Escape the ordinary. We supply the sand and sun. You supply the family, friends, and fun. Visit us at traveltogether.com for further information about our group getaway experiences. Together Travel: Where spending time together matters most. After an open-ended thought-listing task and ad ratings (details omitted for brevity s sake), participants responded to a short scenario in which price comparison and referent were manipulated (as shown in square brackets). You are shopping for luggage for an upcoming vacation. You find one that you like at an online store and buy it. You then discover that a [stranger / friend] bought the exact same luggage (same brand, same style, same features and quality) for 20% [more / less]. It was bought at the same time from the same online store. After reading the scenario, participants judged price fairness via the same three scales as in study 1. Following an open-ended thought-listing task, participants indicated their likelihood of repurchasing at the same store on a 0-100% scale anchored by very unlikely / very likely. Results A fairness index was constructed by averaging the three fairness questions (coefficient α =.95). An ANOVA performed on this index revealed main effects of prime (F(1, 180) = 7.62, p <.01) and price comparison (F(1, 180) = 38.50, p <.01), an interaction of prime and price comparison (F(1, 180) = 5.49, p <.05), and, moreover, the three-way interaction of prime,

14 14 referent, and price comparison predicted by H2 (F(1, 180) = 8.02, p <.01). To understand the nature of the three-way interaction, follow-up tests were conducted for each level of prime. The independent prime condition revealed only a main effect of price comparison (F(1, 104) = 24.73, p <.01; all other F s < 1). As portrayed in table 1 and figure 3, the price paid was perceived as more (less) unfair when the comparative reference price was lower (higher). In the interdependent prime condition, however, the main effect of price comparison (F(1, 76) = 15.01, p <.01) was qualified by its interaction with referent (F(1, 76) = 9.75, p <.01). Consistent with H1 and H2, the interaction reflects a larger fairness difference between the higher and lower price conditions when the referent was a friend (F(1, 76) = 21.96, p <.01) than a stranger (F < 1). Put differently, it was deemed less (more) fair to pay a higher (lower) price than a friend versus stranger. Consumers appear sensitive to the in-group/out-group distinction when interdependence is primed but not when independence is primed. [Insert Table 1 and Figure 3 about here] Analysis of repurchase intention revealed a statistically identical pattern of results: main effects of prime (F(1, 180) = 3.60, p =.06) and price comparison (F(1, 180) = 37.99, p <.01), their interaction (F(1, 180) = 3.64, p =.06), and the predicted three-way interaction of prime, relationship, and price comparison (F(1, 180) = 6.79, p <.01). In the independent condition, main effects of referent (F(1, 104) = 3.46, p =.07) and price comparison (F(1, 104) = 26.42, p <.01) and their interaction (F(1, 104) = 4.11, p <.05) were obtained. Repurchase intention was rated higher (lower) when the comparative reference price was higher (lower), and more so for a stranger than a friend (F(1, 104) = 26.12, p <.01; F(1, 104) = 4.76, p <.05, respectively). In the interdependent condition, a main effect of price comparison (F(1, 76) = 13.82, p <.01) and its interaction with referent were obtained (F(1, 76) = 2.85, p <.10). Repurchase intention was

15 15 higher (lower) when the comparative reference price was higher (lower), and more so for a friend than a stranger (F(1, 76) = 13.11, p <.01; F(1, 76) = 2.32, p =.13, respectively). Relative to the independence condition, consumers appear more sensitive to an in-group versus out-group price comparison when interdependence is primed. An analysis was conducted to test whether the effects of self-construal, relationship, and price comparison on repurchase intention were mediated by fairness perceptions. As noted, the three-way interaction was significant for both fairness and intention. When fairness was included in the full model for intention, fairness was a predictor (F(1, 172) = 51.08, p <.01) and the threeway interaction was no longer significant (F < 1). These results support mediation. Taken together, these results are wholly consistent with H2 and the findings from study 1. Accounts of cross-cultural differences are inherently plagued by a wide array of confounding factors that correlate with culture. In a cross-national pricing context, those differences include not only socio-cognitive cultural factors but also differences in marketplace familiarity. The present study rules out these alternative explanations by manipulating independent/ interdependent self-construal within a single culture, thereby lending credence to our contention that the individualism/collectivism cultural mechanism underlies the results of our studies. STUDY 3: THE ROLE OF SHAME IN COLLECTIVIST CULTURES The objective of the present study was to provide additional evidence for the underlying psychological process that drives consumer price fairness response through the use of more direct measures of process. Specifically, study 3 explores the emotional response of consumers, particularly the role of shame arising from loss of face in collectivist (vs. individualist) cultures. As in the preceding studies, we investigate consumer response to across-customer price comparisons as a function of culture and in-group/out-group price comparisons. We expect

16 16 Chinese/collectivists to react more strongly to in-group versus out-group price comparisons than will Americans/individualists when judging price fairness (H1). Moreover, we expect cultural differences in consumers emotional response such that: H3: Chinese/collectivists will exhibit stronger face-driven emotional responses to ingroup versus out-group price comparisons than will Americans/individualists. H3 predicts a three-way interaction of culture, price comparison, and in-group/out-group (operationalized as friend/stranger) on face-driven emotional responses. Although we measure multiple emotions, the focal emotions of interest are shame and anger, given their obvious relationship to the face construct (Kam and Bond 2008; Lee, Kam, and Bond 2007). For example, a face-losing incident can cause feelings of shame (due to a perceived loss of social status resulting from ill treatment by others; i.e., a self-directed emotion) and feelings of anger (due to the assessment that one has been treated unjustly by another; i.e., an outer-directed emotion). Although evidence is mixed regarding cultural differences in the experience of shame and anger related to face (e.g., Kitayama, Mesquita, and Karasawa 2006; Kam and Bond 2008), shame has been accorded a distinctive role in Asian cultures (Li, Wang, and Fischer 2004; Shaver, Wu, and Schwartz 1992). Inasmuch as shame is a close correlate of face, we argue that consumers should feel more (less) shame when charged a higher (lower) price than another customer. Chinese/collectivist consumers should react more strongly for price comparisons to friends than strangers, inasmuch as friends are a more potent source of gain/loss of face. Reactions of Americans/individualists should differ across friends and strangers to a lesser degree. In other words, we expect that the face-driven emotional response of shame will closely reflect the fairness reactions. Moreover, we expect that the face-driven emotional response of shame among Chinese/collectivist consumers will mediate repurchase intentions after in-group versus out-group comparisons. Although we expect shame to be prominent among

17 17 our Asian sample, we would be unsurprised if differential prices evoked other negative emotions among Americans/individualists. Hence, study 3 measured a variety of plausible emotions. As a secondary objective, the present study also explored consumer response to equal pricing. Although our work deliberately examines the case of price differences across consumers for obvious reasons, the effect of individualism/collectivism on perceived fairness of equal prices is also interesting for reasons to be discussed later. Method Subjects and Design. The experiment was a 3 (Price comparison: higher vs. lower vs. equal) x 2 (Referent: In-group vs. out-group) x 2 (Culture: Chinese vs. American) betweensubjects design. A total of 270 individuals drawn from a sample similar to study 1 participated. Materials and Procedure. Participants read a short scenario in which price comparison and referent were manipulated. The American version (with manipulations shown in square brackets) read as follows: You are shopping for a printer. You find one that you like at a store and purchase it. You later discover that a [friend / stranger] bought the same printer from the same store at the same time for [the same price / 20% more / 20% less]. After reading the scenario, participants judged price fairness via the same three scales as in study 1. After an open-ended thought-listing task, participants were asked How would you feel in this situation? and rated on five-point scales anchored by not a lot / a lot the extent to which they felt: happy, sad, embarrassed, angry, guilty, ashamed, and proud. Participants were also asked How likely are you to shop at the store again? and indicated their response on a 0-100% scale. Results A fairness index was constructed by averaging the three fairness questions (coefficient α =.95 in China,.95 in the USA). An ANOVA performed on this index revealed the expected

18 18 three-way interaction contrast (sample X referent X higher/lower price; F(1, 258) = 3.83, p =.05); the other two-way interaction contrasts (for higher versus same price, and lower versus same price comparisons) were non-significant (p s >.30). A statistically similar three-way interaction contrast was also obtained for repurchase intention (F(1, 258) = 6.59, p <.05) and, importantly, for feelings of shame (F(1, 258) = 5.18, p <.05); the other two-way interaction contrasts were non-significant (p s >.15). 2 To understand the nature of the three-way interaction contrasts, follow-up tests were conducted for each cultural sample. For the fairness index, the American sample revealed only a main effect of price comparison on fairness (F(2, 92) = 52.37, p <.01; all other p s >.15). Simple effects tests revealed that, as expected, Americans judge it fairer to pay a lower (vs. higher) price than a friend (F(1, 92) = 3.05, p <. 01 ) and a stranger (F(1, 92) = 13.05, p <.01). The Chinese sample also revealed a main effect of price comparison (F(2, 166) = , p <.01) and a directional but non-significant two-way interaction contrast (referent X higher/lower price; F(1, 166) = 1.65, p =.20). Simple effects tests revealed that, as expected, Chinese judged it fairer to pay a lower (versus higher) price, and more so for a friend (F(1, 166) = 24.01, p <.01) than a stranger (F(1, 166) = 9.55, p <.01). Repurchase intentions followed the same pattern. The American sample revealed a main effect of price comparison (F(2, 92) = 28.14, p <.01) and a marginal two-way interaction contrast (referent X higher/lower price; F(1, 92) = 3.10, p =.08). Simple effects tests revealed that purchase intentions increase when paying a lower (versus higher) price than a stranger (F(1, 92) = 11.18, p <.01) but not when paying a lower (vs. higher) price than a friend (F < 1). In contrast, the Chinese sample revealed a main effect of price comparison (F(2, 166) = 45.35, p <.01) and the expected two-way interaction contrast (referent X higher/lower price; F(1, 166) = 4.00, p <.05). Simple effects tests reveal that, as predicted, Chinese are less likely to

19 19 repurchase after paying a higher (versus lower) price than a friend (F(1, 166) = 13.05, p <.01); the price paid by a stranger had no effect (F < 1). Of critical interest in this study was the pattern of results for face-related emotions. For feelings of shame, the American sample revealed no significant effects (F s < 1). In contrast, the Chinese sample revealed the expected two-way interaction contrast (referent X higher/lower price; F(1, 166) = 7.28, p <.01). Simple effects tests revealed that, as expected, Chinese felt more shame when paying a higher (vs. lower) price, and more so for a friend (F(1, 166) = 4.09, p <.05) than a stranger F(1, 166) = 3.22, p =.08). [Insert Table 2 and Figure 4 about here] Together, these results reveal a consistent pattern supporting H1 and H3: Chinese/ collectivist consumers are more affected by in-group than out-group price comparisons than are American/individualist consumers. Moreover, shame appears to play a unique role among Chinese consumers, who report more shame when paying a higher (vs. lower) price than a friend, relative to a stranger. We attribute these results to the loss (gain) of face experienced by Chinese when comparing their own price unfavorably (favorably) to that of another in-group member. As collectivists, face is not experienced to the same degree vis-à-vis an out-group member. An analysis was conducted to test whether the effects of culture, relationship, and price comparison on repurchase intention were mediated by shame. As noted previously, the three-way interaction contrast was significant for both shame and repurchase intention. When shame was included in the full model for intention, the interaction of shame and culture was marginally significant (F(1, 246) = 2.89, p <.10) and the three-way interaction contrast was no longer significant (F(1, 246) = 2.38, p =.12). Examining each sample separately, shame predicted repurchase intention (F(1, 106) = 3.46, p =.07) and rendered the interaction of referent and

20 20 higher/lower price non-significant (F < 1) in the Chinese sample. In the American sample, the interaction remained significant (F(1, 59) = 4.60, p <.05) when shame was included as a predictor in the model (F(1, 59) = 2.79, p =.10). 3 These results support mediation by shame in the Chinese but not the American sample. Finally, our experimental design enables investigation of the case of unvarying prices: no consistent pattern of differential response is observed between the American and Chinese samples. This result strengthens our basic argument, albeit indirectly, by showing that crosscultural differences do not emerge when the pricing context does not stimulate the psychological process we espouse (i.e., face). The null effect also lends credence to our assertion that prior reports of a duty- or harmony-driven preference for equality in collectivist cultures do not generalize to the pricing contexts studied here. (If duty or harmony concerns were prominent, a greater relative preference for equal pricing among collectivists should emerge but did not.) Notably, in both cultures, equal pricing led to greater perceptions of fairness and repurchase intent than did unequal pricing (even when the unequal pricing favors the consumer) a drawback of dynamic pricing, regardless of culture. STUDY 4: IN-GROUP VERSUS OUT-GROUP RELATIONSHIPS WITH THE FIRM Thus far, we have provided robust evidence for cultural differences in consumer response to dynamic pricing. A natural question concerns generalizability, which is explored in the present study. In the preceding studies, we examined the situation in which in-group versus out-group price comparisons were manipulated via the relationship with a referent consumer. In the present study we hold the referent consumer constant and vary the relationship of each consumer to the vendor, which was characterized as either a first-time or loyal customer. We naturally expect fairness judgments to be lower (higher) when the price paid is higher (lower) than another

21 21 consumer s price. However, we also expect collectivist/chinese consumers to be more sensitive than American consumers to relationship history. The relationship between a vendor and customer may affect the extent to which the vendor and customer perceive themselves as members of an in-group versus out-group. Chinese consumers should be more sensitive than American consumers to the distinction and therefore experience more change in face in loyal versus first-time vendor interactions. Hence, Chinese consumers (as collectivists) should show greater sensitivity to loyalty differences between themselves and referent customers; American consumers (as individualists) should be relatively unaffected by relationship loyalty. 4 Formally, H4: When judging price fairness, Chinese/collectivists will react more strongly in a loyal versus first-time buyer-seller relationship than will Americans/individualists. H4 predicts a three-way interaction of culture, price comparison, and buyer-seller relationship. Consumers will judge it more unfair (fair) when charged a higher (lower) price than another customer. Collectivist/Chinese consumers will react more strongly to price comparisons when loyal versus first-time shoppers due to face concerns arising from the relationship; individualist/american fairness reactions will differ across relationship loyalty to a lesser degree. Aside from testing robustness, H4 has important implications for relationship marketing to the extent that fairness concerns constrain the vendor s ability to charge a loyalty premium consistently across cultures. For comparison purposes, we included a control group in which relationship loyalty was unspecified. We also measured repurchase intentions, which are particularly pertinent to the issue of relationship loyalty. A corollary to H4 is that repurchase intentions not only track perceived fairness but also are mediated by them. Method Subjects and design. The experiment was a 2 (Price comparison: higher vs. lower) x 3 (Relationship: Loyal vs. First-time vs. Unspecified) x 2 (Culture: Chinese vs. American)

22 22 between-subjects design. A total of 255 individuals from a sample similar to study 1 participated. Materials and procedure. Participants read a short scenario in which price comparison and relative relationship were manipulated. The participant was loyal and a comparison referent was a first-time shopper, the opposite was true, or no prior relationships were specified. The American version (with manipulations shown in square brackets) read as follows: You are shopping for a jacket. You find one that you like at a clothing store and buy it. [You are a satisfied and loyal shopper at the store, know the store personnel, and buy clothes there frequently. / You are a first-time shopper at the store. / omitted] You find out that a friend bought the same jacket (same brand, same quality, same style) for 20% [more / less]. It was bought at the same time from the same store. [Your friend is a firsttime shopper at the store. / Your friend is a satisfied and loyal shopper at the store, knows the store personnel, and buys clothes there frequently. / omitted] Fairness reactions and repurchase intention were elicited using the same measures as in study 2. Results A fairness index was constructed from the three individual items (coefficient α =.92 in both samples). ANOVA revealed main effects of relationship (F(2, 243) = 3.88, p <.05) and price comparison (F(1, 243) = 91.83, p <.01), the interaction between them (F(2, 243) = 4.28, p <.05), and, moreover, the three-way interaction of culture, relationship, and price comparison predicted in H4 (F(2, 243) = 5.78, p <.05). To understand the nature of the three-way interaction, follow-up tests were conducted for each cultural sample. The American sample revealed a main effect of price difference (F(1, 118) = 47.84, p <.01) and relationship (F(2, 118) = 3.47, p <.05) but no interaction (F < 1). As table 3 and figure 5 indicate, the price paid by the consumer expectedly was perceived as less (more) fair when the comparative reference price was lower (higher), irrespective of prior relationship. Fairness perceptions also were higher overall for a first-time relationship (F(1, 118) = 6.29, p <.05) than for loyal or unspecified relationships (which did not differ, F < 1), presumably reflecting lower

23 23 standards of fairness in the former case. When buyer-seller relationships were unspecified, responses mimicked the loyalty condition. The Chinese sample revealed a main effect of price comparison (F(1, 125) = 43.62, p <.01) that was qualified by an interaction with relationship (F(2, 125) = 10.51, p <.01). As the pattern in table 3 and figure 5 indicates, consumers were more sensitive to price comparisons in a loyal relationship than in a first-time relationship (F(1, 125) = 20.82, p <.01). In a loyal relationship the price paid by the consumer was perceived as less (more) fair when the comparative reference price was lower (higher) (F(1, 125) = 46.36, p <.01). In a first-time relationship the comparative price had no effect (F < 1). Moreover, the unspecified case differed marginally from the loyal case (F(1, 125) = 3.68, p =.06), suggesting that consumers responded to fairness as if in a somewhat loyal relationship. [Insert Table 3 and Figure 5 about here] Results for repurchase intention revealed a statistically identical pattern of results: main effects of relationship (F(2, 243) = 10.46, p <.01), price comparison (F(1, 243) = 59.67, p <.01), and the interaction (F(2, 243) = 10.39, p <.01), and the predicted three-way interaction of culture, relationship, and price comparison (F(2, 243) = 7.26, p <.01). In the American sample, repurchase intention revealed main effects of relationship (F(2, 118) = 3.47, p <.05) and price comparison (F(1, 118) = 47.84, p <.01) but no interaction (F < 1). As expected, repurchase intentions were higher (lower) when the comparative price was higher (lower), irrespective of prior relationship with the vendor. In the Chinese sample, a main effect of price comparison (F(1, 125) = 24.99, p <.01) was qualified by its interaction with relationship (F(2, 125) = 19.11, p <.01). As expected, repurchase intentions were higher (lower) when the comparative price was higher (lower) in a loyal relationship (F(1, 125) = 46.36, p <.01) but less so in a first-time buyer

24 24 relationship (F(1, 125) = 3.06, p =.08). When the buyer-seller relationships were unspecified, responses mimicked the loyalty condition (F(1, 125) = 11.68, p <.01). An analysis was conducted to test whether the effects of culture, relationship, and price comparison on repurchase intention were mediated by fairness perceptions. As noted, the threeway interaction was significant for both fairness and intention. When fairness was included in the full model for intention, fairness was a significant predictor (F(1, 231) = 85.26, p <.01) and the three-way interaction was no longer significant (F < 1). These results support mediation. Consistent with H4, collectivist/chinese consumers appear to be more sensitive to relationship loyalty when judging fairness than individualist/american consumers. When relatively loyal to a firm, both Chinese and American consumers perceived prices as less (more) fair when paying more (less) than another first-time customer. When a first-time customer (i.e., not loyal), American consumers responded in a similar manner. In contrast, first-time Chinese consumers were strikingly unaffected by comparison to a higher or lower price paid by another loyal customer, judging the price as equally fair. In the absence of a stated relationship, both Chinese and American consumers reacted as if loyal (i.e., assuming their own loyalty was greater than another customer) an egocentric bias that may increase demands in the marketplace for fairness in pricing. Once again, our hypotheses and results are predicated on cultural differences that affect sensitivity to across-customer price comparisons. In across-customer price comparisons, Chinese consumers reacted more strongly to price comparisons in a loyal (versus first-time) buyer-seller relationship; American consumers responded equally, regardless of such differences. We attribute these results to the collectivist (individualist) cultural characteristics of Chinese (American) consumers that orient Chinese consumers toward the in-group, evoking greater face concerns when the across-consumer comparison evokes an in-group relationship. In

25 25 so doing, we argue for both the robustness and generalizability of our fundamental assertions. GENERAL DISCUSSION Overall, these studies provide robust evidence for cultural differences in perceptions of price fairness as they relate to across-consumer price comparisons. Study 1 demonstrated the basic phenomenon: collectivist (Chinese) consumers are more sensitive to in-group versus outgroup differences than are individualist (American) consumers. Studies 2 and 3 provided evidence for the underlying psychological processes: study 2 examined the role of culture by manipulating independent/interdependent self-construal directly, and study 3 examined the role of shame evoked by face concerns among collectivist (Chinese) consumers. To explore generalizability of the phenomenon, study 4 demonstrated that collectivist (Chinese) consumers are more sensitive to in-group versus out-group differences operationalized in terms of the customer-firm relationship than are individualist (American) consumers. Across these studies, evidence for the basic phenomenon is robust indeed, we replicate the basic in-group/out-group differential response among collectivists or interdependents in every experiment. Theoretical Contributions Fairness and Pricing. The present research makes several contributions to the price fairness literature. First, we illuminate the role of culture (individualism/collectivism) in determining fairness reactions to across-customer price comparisons. Second, we provide evidence for moderators in determining fairness response to across-customer price comparisons, including salient self-construal (independent/interdependent) and the type of referent (ingroup/out-group and loyal/first-time buyer). Third, we provide evidence for psychological process through causal evidence for the role of culture (via manipulations of self-construal) and the role of face (via the face-related emotional response of shame). To our knowledge, past

26 26 research has not investigated price fairness reactions from a cross-cultural perspective nor, naturally, factors that would contribute to cross-cultural differences. Fairness and Culture. Prior research on fairness and culture has tended to focus somewhat narrowly (in our view) on fairness within a reward-allocation context. For example, individualists use an equity rule in reward allocation regardless of the group membership of their interaction partner; in contrast, collectivists use an equality (equity) rule when interacting with an in-group (out-group) member, purportedly due to the collectivist value of harmony or duty to the in-group (e.g., Hui, Triandis, and Yee 1991; Leung and Bond 1984). Based on this result, one might expect collectivists to judge equality in pricing as fairer across friends than strangers; individualists should judge equality in pricing equally fair regardless of the friend-stranger distinction. However, other researchers (e.g., Chen 1995; Leung 1997; Fischer and Smith 2003) provide reason to doubt the generalizability of the traditional reward-allocation findings to contexts in which the allocator is not also a recipient of the reward (and thereby responsible for harmony or duty to the in-group). Indeed, we argue that fairness response to in-group/out-group price comparisons is driven by face concerns, not concerns about harmony or duty. If duty or harmony concerns were predominant, collectivist fairness response should be weaker for price comparisons across friends versus strangers. In contrast, we observe a robust egocentric bias in fairness response that is enhanced when collectivists make price comparisons to in-groups versus out-groups which is consistent with a face-based account. Moreover, if duty or harmony concerns were prominent, then we might also expect cross-cultural differences in consumer response to equal pricing (i.e., a greater relative preference for equal pricing among collectivists) an outcome that was not observed when equal pricing was explicitly examined in study 3. Based on these arguments and the preponderance of evidence reported herein, we

27 27 believe that face concerns underlie the cultural differences in response to across-consumer price comparisons and suggest that the role of face deserves greater attention in future research. Fairness and Emotions. The present research also contributes to the literature on culture and emotions. Although prior research has noted the universality of emotions, cultural differences have begun to emerge (e.g., Scherer and Wallbott 1994). Cultural affordance refers to the idea that cultural environments carry the potential to evoke different sets of emotions (Kitayama and Markus 1999). For example, shame and anger are both unpleasant emotions that may arise from an aversive experience, but shame relates more to the theme of failure in the social network (premised on social interdependence) whereas anger relates more to the theme of unfair goal interference (premised on independent selves). Consistent with these characterizations of emotions, Japanese reported more shame and Americans reported more anger following aversive experiences (Kitayama, Mesquita, and Karasawa 2006). Our own findings which control for the type of aversive experience offer some support for this viewpoint. Price fairness response among Chinese was mediated by shame, consistent with a collectivist culture in which the self is embedded in social networks and attuned to the in-group. In contrast, price fairness response among Americans appears to be mediated by anger, consistent with an individualist culture in which the self is independent and autonomous. These results point to the importance of investigating psychological process across cultures inasmuch as culturally distinct psychological processes may underlie outwardly similar phenomena. Limitations and Future Research Despite ample precedents in the literature, the usual caveats apply to scenario-based laboratory research using college student samples. We note that the cultural differences observed herein are arguably conservative inasmuch as college-educated consumers in China are more

28 28 westernized than the general population. In addition, we note that cross-cultural comparisons are naturally plagued by a set of inherent confounds. We strove to address confounds through multiple operationalizations of culture (comparing across nations, but also manipulating selfconstrual within culture) and in-group/out-group (i.e., friend/stranger; loyal/first-time shopper). In addition, we investigated mediators (face-driven emotional response) and a related phenomenon (equal pricing) to provide support for the underlying psychological process and to reduce the plausibility of alternative explanations. Nonetheless, future research investigating cross-cultural differences in price fairness perceptions is merited. We suggest that future cross-national research on price fairness consider two fundamental dimensions: culture and the marketplace. Our research has primarily examined cultural differences in individualism/collectivism and their implications for price fairness perceptions. This dimension, one of Hofstede s (1980) original cultural dimensions, has received the lion s share of attention in the literature, and we agree with other researchers who call for a more expansive consideration of cross-cultural variation (e.g., Brewer and Chen 2007; Oyserman, Koon, and Kemmelmeier 2002). Indeed, our own investigation of individualism/collectivism points to another important cultural dimension, i.e., the role and emotional experience of face. Moreover, we suggest that the cultural environment on the ground also merits attention in this case, the characteristics of the marketplace (such as social norms, traditional practices, and socioeconomic history) experienced by consumers that likely shape their attitudes, expectations, beliefs and behaviors. Further research of this nature would contribute to a greater understanding of marketplace metacognition (Wright 2002) and how it is shaped by culture and developed through experience. Implications

29 29 Marketers have paid increased attention to the potential of individual-level price discrimination (or dynamic pricing) in accordance with consumer use of the Internet and developments in information technology. The present research, consistent with Haws and Bearden (2006), suggests that fairness concerns may limit consumer acceptance of such pricing practices and may do so differentially across cultures. For example, the relative insensitivity of consumers to out-group (vs. in-group) price comparisons may help facilitate the acceptance of tuangou (the practice of team buying by consumers to obtain lower prices), which appears to be more popular among collectivist Chinese than individualist Americans (Economist 2006). However, other research (not reported here) indicates that unfairness response is mitigated in both cultures when other aspects of the transaction differ, thereby enabling a seller to utilize differentiation and customization as defenses against unfairness reactions. Of course, exceptions to the rule (such as special pricing for seniors or children, or group buying in business-tobusiness contexts) suggest that traditional practice and social norms may also play a role and that, given time, dynamic pricing could become a better understood and more accepted practice. In addition, the foundation of relationship marketing is that loyal customers are more profitable, in part due to decreased price sensitivity. Contrary to this popular wisdom, some past research suggests that long-time customers may be more sensitive to price and therefore less profitable to firms (Bolton, Warlop, and Alba 2003; Reinartz and Kumar 2000). The present research demonstrates that Chinese consumers are especially sensitive to relationship loyalty, judging it more unfair (fair) to pay a higher (lower) price when in a loyal versus first-time buyerseller relationship. Interestingly, both Chinese and American participants react as if relatively loyal when the relationship is unspecified, suggesting that a loyalty standard may be widely applied, putting pressure on marketers to deliver fair pricing. Moreover, fair pricing may be

30 30 viewed as a form of distributive justice, and it seems reasonable to expect that culture will also influence demands for, and impact of, interactional and procedural justice (e.g., Brockner et al. 2005) topics that merit further research.

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36 FOOTNOTES Journal of Marketing Research, Article Postprint, Volume XLVI 1. We acknowledge that consumers might gain face by paying a higher price, for example during conspicuous consumption, a context that we do not examine in the present research. 2. As expected, the interaction contrasts were non-significant (all F s < 1) for the other emotions, and the interaction contrast of shame versus the other emotions was also significant (F(1, 257) = 6.26, p =.01) both pointing to a uniquely shame-based emotional response. Other effects not germane to the hypotheses are omitted for brevity. 3. A reasonable question concerns what (if any) emotional response is evoked among American consumers. A post-hoc analysis was conducted in the American sample to examine alternative emotions as potential mediators. Price comparison had a significant effect on fairness (as reported in the main text), repurchase intention (F(1, 63) = 9.16, p <.01) and anger (F(1, 63) = 21.45, p <.01). Moreover, anger predicted repurchase intention (F(1, 59) = 16.95, p <.01) and rendered the effect of price comparison nonsignificant (F < 1). These results support anger as a mediator. 4. Darke and Dahl (2003) found that another consumer s relationship with the seller mitigated unfairness reactions to across-customer price differences but did not control for, or examine, cultural variables. These researchers confirm (personal communication) that most participants in their sample were of Asian heritage, which is arguably consistent with our prediction that relationship information will affect fairness response among collectivists.

37 TABLE 1: FAIRNESS AND REPURCHASE INTENTION AS A FUNCTION OF PRICE COMPARISON, REFERENT, AND SELF-CONSTRUAL (STUDY 2) Self-construal Referent Price Comparison N Fairness Repurchase Intention Interdependent Friend Lower (1.74) (28.89) Interdependent Friend Higher (1.30) (25.30) Interdependent Stranger Lower (2.04) (25.74) Interdependent Stranger Higher (2.54) (29.10) Independent Friend Lower (1.54) (24.95) Independent Friend Higher (1.86) (30.78) Independent Stranger Lower (1.69) (21.47) Independent Stranger Higher (1.76) (29.26) Note: Price comparison refers to whether the price paid by the referent customer is higher or lower than the price paid by the target customer.

38 TABLE 2: FAIRNESS, SHAME, AND REPURCHASE INTENTION AS A FUNCTION OF PRICE COMPARISON, REFERENT, AND CULTURAL SAMPLE (STUDY 3) Culture Referent Price Comparison N Fairness Shame Repurchase Intention China Friend Lower (1.05) 2.00 (1.05) (22.72) China Friend Higher (1.43) 1.52 (0.74) (31.58) China Friend Equal (0.87) 1.68 (1.02) (20.45) China Stranger Lower (1.41) 1.57 (0.84) (26.67) China Stranger Higher (1.52) 2.00 (0.96) (28.99) China Stranger Equal (0.84) 1.33 (0.76) (15.64) USA Friend Lower (1.82) 1.47 (0.87) (23.31) USA Friend Higher (1.66) 1.65 (0.93) (25.23) USA Friend Equal (1.25) 1.40 (0.83) (22.51) USA Stranger Lower (1.48) 1.84 (1.17) (17.59) USA Stranger Higher (1.60) 1.64 (1.01) (24.64) USA Stranger Equal (1.31) 1.38 (0.72) (22.66)

39 TABLE 3: FAIRNESS AND REPURCHASE INTENTION AS A FUNCTION OF PRICE COMPARISON, BUYER-SELLER RELATIONSHIP, AND CULTURAL SAMPLE (STUDY 4) Culture Relationship Price Comparison N Fairness Repurchase Intention China Loyal Lower (1.01) (27.89) China Loyal Higher (1.37) (18.83) China First-time Lower (1.37) (21.94) China First-time Higher (1.56) (26.03) China Unspecified Lower (1.25) (19.84) China Unspecified Higher (1.55) (24.77) USA Loyal Lower (1.33) (26.74) USA Loyal Higher (1.70) (22.05) USA First-time Lower (1.47) (29.98) USA First-time Higher (1.43) (20.65) USA Unspecified Lower (1.13) (24.06) USA Unspecified Higher (1.73) (26.88)

40 40 Price paid by target consumer Price paid by other customer FIGURE 1: ORGANIZATIONAL FRAMEWORK Culture: Individualism/Collectivism (studies 1, 3, 4) Self-construal (study 2) Referent: In-group versus Out-group (studies 1-4) Price Fairness Perception Face Response: Shame and Anger (study 3) Repurchase Intention (studies 2-4)

41 FIGURE 2: FAIRNESS AS A FUNCTION OF PRICE COMPARISON, REFERENT, AND CULTURAL SAMPLE (STUDY 1) CHINA USA Notes: 1) In this and subsequent studies, price comparison refers to whether the price paid by the referent customer is higher or lower than the price paid by the target customer, and the error bar represents the 95% confidence interval for each mean. 2) In cross-national comparisons, the patterns of response within each cultural sample are of focal interest; main effect comparisons across sample are inadvisable due to cross-cultural measurement issues.

42 FIGURE 3: FAIRNESS AS A FUNCTION OF PRICE DIFFERENCE, REFERENT, AND SELF-CONSTRUAL (STUDY 2) INTERDEPENDENT SELF-CONSTRUAL INDEPENDENT SELF-CONSTRUAL

43 FIGURE 4: FAIRNESS AS A FUNCTION OF PRICE DIFFERENCE, REFERENT, AND CULTURAL SAMPLE (STUDY 3) CHINA USA

44 FIGURE 5: FAIRNESS AS A FUNCTION OF PRICE COMPARISON, BUYER-SELLER RELATIONSHIP, AND CULTURAL SAMPLE (STUDY 4) CHINA USA