New study finds shoppers are sensitive to the moral cost of certain prices

A new study published in the Journal of Consumer Research has found that raising prices on essential products can cause lasting reputational harm that outweighs any short-term financial benefits.

In the view of Margaret C. Campbell, professor at UC Riverside School of Business who led the study, the findings shed light on the fact that supply and demand aren’t the only factors informing price expectations. Morality is also on the mind of shoppers.

“People stop wanting to do business with companies they see as acting unfairly,” she said in a statement.

The caveat: This sensitivity to the morality of pricing only applies to essential goods. When it comes to nonessential or discretionary goods, consumers are less sensitive to questions of fairness or ethics.

“If companies are perceived as taking advantage of vulnerable people—like the elderly or the uninsured—they may make short-term profits but suffer long-term damage to their brand,” Campbell said.

The report points to the example of hearing aids as being a product consumers are thinking more ethically about when it comes to price. 

Using a metric called “inferred harm,” the report tries to capture what consumers perceive as the “psychological and welfare loss” of certain prices.

“People think it is unfair to keep the same price when costs decrease for products like eyeglasses that are important for consumer well-being because the firm could afford to charge a lower price,” Campbell said.

In the difficult inflationary environment of recent years, however, it’s been an ongoing challenge for retailers to manage consumers’ perceptions while also meeting pressing financial needs.

The question of fairness in pricing reared its head in another context recently. With the emergence of so-called “surveillance pricing”—when prices are set using AI-powered algorithms—a legal battle is brewing, and fairness is at the center of the debate.

The topic came up again earlier this year when Walmart and Target were allegedly directing employees to tear physical price tags off their products, causing concern among some shoppers that the retailers were trying to covertly adjust prices in response to tariffs.