How Price Fairness and Fit Affect Customer Tariff Evaluations

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How price fairness and fit affect Customer tariff

evaluations
customer tariff evaluations
Philipp Leinsle, Dirk Totzek and Jan Hendrik Schumann
School of Business, Economics and Information Systems, University of Passau,
Passau, Germany
735
Received 13 October 2017
Abstract Revised 19 March 2018
26 May 2018
Purpose – Promotional cues related to notions of fair prices or pricing designed to fit consumers’ needs are Accepted 3 June 2018
prevalent for many service offers. The purpose of this paper is to investigate how both customers’ price
fairness and idiosyncratic fit perceptions shape their tariff evaluations.
Design/methodology/approach – Two experimental studies involving different tariff types and service
contexts test the complex interplay of customers’ perceived price fairness and idiosyncratic fit with customer
and context characteristics on their tariff evaluations.
Findings – Customers judge tariffs drawing on both the perceived price fairness and idiosyncratic fit,
driven by the perceived price level of the tariff and the perceived pricing transparency of the firm.
Customers’ service usage and consumption goals moderate these effects: heavy users and hedonic
consumers indicate lower price sensitivity while focusing more on their transparency perception. The role
of perceived price fairness and idiosyncratic fit for tariff choice depends on the tariff/service context;
idiosyncratic fit is important when it is incidental (e.g. flat rates) rather than intentional (i.e. customized
tariffs) and when customers lack the expertise or confidence to evaluate price fairness such as in the case
of relatively new services.
Originality/value – Prior studies focused on either price fairness or idiosyncratic fit and thus cannot fully
explain the complex interplay between both in the context of tariff choice. This paper explicates the
conditions that affect the relative importance of both concepts and under which incidental offers are better
received than premeditated ones.
Keywords Pricing, Consumer psychology, Price fairness, Idiosyncratic fit heuristic, Service pricing,
Tariff choice
Paper type Research paper
Pricing is one of the most critical issues for services firms and pricing decisions are
strongly driven by customer-related objectives (Indounas and Avlonitis, 2009). For
example, when designing and promoting price plans (i.e. tariffs), service providers often
use cues to prompt notions among consumers that the prices will particularly fit their
needs or are fair. For example, the US wireless provider AT&T emphasizes that customers
can choose the price plan that “best fits your needs,” across a set of flat-rate, pay-per-use
and select plans (i.e. customized tariffs with add-on options) (AT&T, 2017). In contrast,
Sprint’s price plans take the slogan “best price for unlimited” (Sprint, 2018). The AT&T
example suggests that customers might base their decision on the degree to which a tariff
particularly fits their preferences (i.e. the idiosyncratic fit heuristic), whereas the
Sprint case implies that customers base those decisions on the degree to which the tariff’s
price seems fair.
In general, customers seek cues which serve as proxies of the offer’s attractiveness or
value (e.g. Simonson, 2005). Clearly, customers judge an offer as attractive according to their
perceptions of price fairness (Xia et al., 2004), or their sense that the price of an offer is “right,
just, or legitimate” (Campbell, 2007, p. 261). Behavioral pricing research might lead one to
assume that customers judge an offer’s attractiveness mainly on the basis of price fairness
(e.g. Homburg et al., 2014). However, price fairness judgments are inherently comparative Journal of Service Management
(e.g. Kwak et al., 2015) and customers frequently lack well-defined reference prices, so Vol. 29 No. 4, 2018
pp. 735-764
judging price fairness can be challenging (Sela et al., 2013). This challenge is particularly © Emerald Publishing Limited
1757-5818
pertinent in the context of tariff choice as customers face an overload of multiple tariffs DOI 10.1108/JOSM-10-2017-0270
JOSM (Homburg et al., 2014) and uncertainty about their future usage or billing amounts (Nunes,
29,4 2000). Thus, customers without readily available reference points might rely instead on their
perceptions of idiosyncratic fit with a particular offer (Kivetz and Simonson, 2003). This
heuristic evaluation pertains to whether an offer provides a better “perceived fit” with their
preferences for them than for others. Because they engage in a heuristic evaluation,
consumers tend to overweight their perceptions of fit with some “signature preferences”
736 (Simonson, 2005, p. 36).
Each concept has been used to explain customers’ reactions to a firm’s pricing, promotion
and framing tactics (e.g. Hamilton and Srivastava, 2008; Lo et al., 2007). However, it is
unclear how and to what extent both price fairness and idiosyncratic fit shape consumers’
tariff evaluations in different service contexts. In particular, customers’ reliance on their
price fairness or idiosyncratic fit evaluation in tariff choice might also depend on customer
characteristics (e.g. their expertise or preference confidence) and context characteristics (e.g.
incidental vs intentional fit tariffs and traditional vs emerging services) related to the
availability and salience of alternative reference prices that enable comparison processes
(Kivetz and Simonson, 2003; Lo et al., 2007). In turn, the impact of firm-based factors on price
fairness and idiosyncratic fit might also be affected by the individual customer
characteristics (Hamilton and Chernev, 2013, Xia et al., 2004). Figure 1 illustrates the
research void addressed in this paper.
This lack of clarity is troublesome for both academic research and managerial practice
because service providers lack guidance on how to effectively manage cues related to price
fairness and idiosyncratic fit to increase customers’ purchase intentions. The use of price
Determinants Outcomes
– Tariff-Choice Biases: Lambrecht and Skiera (2006); – Consumer Learning: Ascarza et al. (2012); Goettler and Clay (2011);
Uhrich et al. (2013) Iyengar et al. (2007)
– Uncertainty: Iyengar et al. (2007); Iyengar et al. (2008); – CLV: Iyengar et al. (2007); Lambrecht and Skiera (2006)
Lambrecht et al. (2007); Nunes (2000) – Profitability: Lambrecht et al. (2007); Lambrecht and Skiera (2006)
– Retention: Iyengar et al. (2007); Lambrecht and Skiera (2006)
Tariff Choice
Research Gaps:
(1-4) Behavioral Mechanisms of Tariff Evaluation and Choice
(5) New-Emerging Tariffs (Incidental Fit versus Intentional Fit)
(6) Multiple Industry-Approach (Traditional versus Emerging)
Research Void: Interplay of Price Fairness and

Idiosyncratic Fit Heuristic in Tariff Choice
Research Gaps: Research Gaps:

(1) Price Fairness Perception and Reaction to Tariff Framing (2) Idiosyncratic Fit Perception and Reaction to Tariff Framing
(3) Moderators for Determinants of Price Fairness (3) Moderators for Determinants of Idiosyncratic Fit
(4) Moderators for Determinants of Willingness to Buy (4) Moderators for Determinants of Willingness to Buy
Price Fairness Idiosyncratic Fit Heuristic
Price Comparison Price Comparison

– Anthropomorphization: Kwak et al. (2015) – Inferred Motives: Sela et al. (2013)
– Culture and Emotions: Bolton et al. (2010) – Product Features: Liberman and Ross (2006);
– Inferred Motives: Bolton et al. (2003); Simonson et al. (1994)
Campbell (1999, 2007); Habel et al. (2016)
– Transaction Similarity and Trust: Xia et al. (2004)
Pricing and Promotion Tactics Pricing and Promotion Tactics

– Dynamic Pricing: Haws and Bearden (2006); – Bargain Pricing: Sela et al. (2013)
Weisstein et al. (2013) – Loyalty Programs: Kivetz and Simonson (2003)
– Price and Promotion Discrimination: Anderson and Simester (2008) – Price and Promotion Discrimination: Lo et al. (2007)
– Price-Matching Policy: Kukar-Kinney et al. (2007)
– Revenue Management: Kimes and Wirtz (2003)
Framing Tactics Framing Tactics

– Price Complexity: Homburg et al. (2014) – Customization: Simonson (2005); Venkatesan and Farris (2012)
Figure 1. – Price Framing Format: Hamilton and Srivastava (2008);
Xia and Monroe (2004)
– Frequency Cues: Hamilton et al. (2011)
Literature review
cues is problematic if customers cannot make a meaningful judgment about the market Customer tariff
prices due to the overload of multiple tariff structures in a service context, and they thus evaluations
must rely on a decision heuristic such as their idiosyncratic fit with the offer. Similarly, the
use of intentional fit cues can be counterproductive, if customers already perceive a fit with
the tariff.
Against this background, this paper addresses three research questions:
RQ1. How do both customers’ price fairness and idiosyncratic fit perceptions affect their 737
tariff evaluations and their willingness to buy a particular service tariff?
RQ2. How do customer characteristics moderate the role of the determinants of price
fairness and idiosyncratic fit, as well as the interplay between these two tariff
evaluation concepts?
RQ3. How do context (i.e. tariff and service) characteristics affect the relative importance
of price fairness and the idiosyncratic fit heuristic for customers’ willingness
to buy?
Results of two experimental studies with students and a representative consumer panel
provide three important contributions to the service literature. This paper first shows that
both idiosyncratic fit and price fairness are determinants of tariff choice and identifies
customers’ perceptions of price level and pricing transparency as key determinants. Second,
this paper addresses recent calls to explore how the impact of these price-related factors on
customers’ offer evaluations are moderated by customer characteristics (Hamilton and
Chernev, 2013). In particular, this paper underlines the critical role of customers’ usage
intensity and consumption goals (Uhrich et al., 2013): customers may overpay for frequently
used or hedonic service offers while they focus more on the transparency of the provided
price information to infer whether the firm is setting the price to attract them. Third, this
paper explicates the conditions that affect the relative importance of price fairness or
idiosyncratic fit for customers’ tariff evaluations (Lo et al., 2007). More specifically,
idiosyncratic fit is particularly important for tariffs that provide incidental fit (i.e. flat-rate,
pay-per-use and cost-cap tariffs which are not tailored to fit customers’ preferences) rather
than intentional fit (i.e. customized select tariffs which are designed to fit customers’
preferences). In addition, the need to rely on the idiosyncratic fit heuristic surges when
customers lack the expertise or confidence to judge a tariff’s price fairness such as in the
case of emerging rather than traditional service types (Ascarza et al., 2012; Kivetz and
Simonson, 2003). These results provide actionable recommendations for optimal tariff
design for different service contexts and customer segments.
Conceptual background and hypotheses

Social comparison theory, price fairness and the idiosyncratic fit heuristic
The conceptual model builds on social comparison theory (SCT) as overarching theory to
investigate the interplay between price fairness and idiosyncratic fit as drivers of
consumers’ intentions to choose a particular service tariff. SCT postulates a human drive to
compare one’s own outcomes and preferences with the outcomes and preferences of others
(Festinger, 1954). Although price fairness and idiosyncratic fit exhibit a theoretical fit
because both concepts are similarly rooted in SCT, the key difference between these
constructs pertains to the comparison basis.
That is, price fairness judgments entail some comparison of a price or procedure with a
pertinent standard, reference, or norm (Xia et al., 2004). As further refinements of SCT, both
equity theory (Adams, 1965) and the theory of distributive justice (Homans, 1961) suggest that
perceptions of fairness arise when a person compares one outcome (e.g. input-to-output ratio)
with a comparative outcome. In the case of price fairness, the outcomes for comparison are
JOSM reference prices (Kwak et al., 2015; Xia et al., 2004). In this respect, customers judge an offer to
29,4 be attractive when they perceive the price as “fair” (Bolton et al., 2003; Campbell, 1999).
In contrast, with the social comparison-induced idiosyncratic fit heuristic, consumers
rely on their perceptions of the relative fit of the offer to their preferences or needs vs others
(Kivetz and Simonson, 2003). If customers believe they experience an especially good fit with
an alternative, they conclude that this alternative is particularly attractive to them. In other
738 words, idiosyncratic fit indicates that the customer perceives a relative advantage with
respect to that option, which is an indicator of an attractive opportunity and thereby
providing additional value (Kivetz and Simonson, 2003; Sela et al., 2013). However, these
comparisons are often implicit and relate to some unspecified “others” (Lo et al., 2007; Xia
et al., 2004). Accordingly, idiosyncratic tariff fit captures the customers’ perception that a
tariff particularly fits their individual preferences (i.e. specific benefits or needs of using the
service). In this respect, the conceptual model addresses consumers’ implicit comparisons
with regard to both price fairness and idiosyncratic fit.
In addition, SCT implies that customers’ reliance on price fairness or idiosyncratic
fit—as cues to assess the offer’s attractiveness or value—depends on the availability and
salience of alternative reference points (Kivetz and Simonson, 2003; Xia et al., 2004). When
customers do not have readily available reference points, such as similar, previously
encountered prices of offers, assessing price fairness becomes more challenging (Kahneman
et al., 1999; Sela et al., 2013). That is, customers are more likely to engage in a heuristic
evaluation whether the offer provides a better fit for them than for others (Kivetz and
Simonson, 2003; Sela et al., 2013). As a result, the role of price fairness and idiosyncratic fit
should be moderated by customer and context characteristics affecting the availability and
salience of reference prices (Kivetz and Simonson, 2003; Lo et al., 2007; Xia et al., 2004).
Price fairness-related mechanisms in tariff evaluation and choice

It is well established that firms’ pricing and promotion tactics affect customers’ price
fairness judgments (see Figure 1). In particular, price comparisons and inferred motives
related to firms’ pricing tactics are key elements of customers’ price fairness judgments
(Campbell, 2007; Habel et al., 2016). Notably, tariff framing affects price fairness (Homburg
et al., 2014). In line with these findings, customer perceptions of the tariff’s price level and the
firm’s pricing transparency (i.e. inferred motive) should be determinants of price fairness
which, in turn, should affect a customer’s willingness to buy a particular tariff. These
established effects in the context of tariff choice are addressed empirically without
formulating hypotheses (Figure 2).
Perceived price level captures the customer’s belief that the price of an offer is “cheap” or
“expensive” (Dodds et al., 1991). SCT and prior research suggest that paying a higher price
(in comparison to another unspecified but expected cheaper price) triggers perceptions of
inequality and so should negatively affect price fairness judgments (Kwak et al., 2015; Xia
et al., 2004). In addition, these comparisons are guided by customers’ inferences as to why
firms set particular prices (Bolton et al., 2003). Accordingly, the perceived pricing
transparency captures the degree to which a customer infers that the firm’s pricing is
intentionally open, honest and understandable (Homburg et al., 2014). When the firm’s
pricing is inferred to be transparent, it is more likely that the price would be perceived as fair
due to a fair process effect (Homburg et al., 2014; Kukar-Kinney et al., 2007). Customers’ price
fairness judgments affect an offer’s attractiveness and should influence their willingness to
buy (Campbell, 1999; Xia et al., 2004).
Idiosyncratic tariff fit-related mechanisms in tariff evaluation and choice

The idiosyncratic fit heuristic also has been studied in the field of pricing and promotion
tactics (see Figure 1). In this respect, customers’ price comparisons and inferences about
Determinants Tariff Evaluation Outcome
Customer tariff
Customer Characteristics (Study 2) evaluations
Characteristics
– H4a–H4d: Service Usage – H7a–H7b: Expertise

Customer
– H5a–H5d: Hedonic Consumption Goal – H8a–H8b: Preference Confidence

– H6a–H6d: Utilitarian Consumption Goal
H4–H6 H7–H8
739
Perceived Price
Price Fairness
Level
–
+
Customer Perceptions
H1 –
Willingness to Buy
+
H3 +
Perceived Pricing H2 + Idiosyncratic

Transparency Tariff Fit
H9–H10
Legend:
Context Characteristics (Study 2)
Characteristics
Manipulated
Context
Tariff Type
H9: Incidental Fit versus Intentional Fit
Measured
Service Type
Hypothesized H10: Traditional versus Emerging
Basic
Figure 2.
Note: Control variables for endogenous variables include age, income and monthly expenditures Conceptual framework
on service usage
firms’ motives also are key elements of idiosyncratic fit perceptions (Sela et al., 2013).
Moreover, the framing of an offer in terms of customization (Simonson, 2005) and frequency
cues (Hamilton et al., 2011), affects idiosyncratic fit. Thus, customer perceptions of the
tariff’s price level and the firm’s pricing transparency (i.e. inferred motive) also should affect
idiosyncratic fit (Figure 2).
In general, the offer’s price has both objective external properties and subjective internal
representations derived from the perceptions of price (Dodds et al., 1991): the same price
stimulus may be coded cognitively as “expensive” by some customers and “cheap” by others.
Therefore, given a constant objective price, customers’ evaluation of a particular tariff frame is
based on their subjective price perception (i.e. price level) related to that tariff frame (Homburg
et al., 2014). A higher perceived price has a negative effect on the offer’s attractiveness (Kivetz
and Simonson, 2003; Simonson, 2005), so the offer should be perceived to offer poorer fit with
customers’ preferences (Liberman and Ross, 2006; Lo et al., 2007; Simonson, 2005; Simonson
et al., 1994). In line with SCT, prices can repel customers if the monetary sacrifice is more
painful for them than for others. Thus, customers perceiving an expensive price for the same
tariff should perceive a lower fit (Lo et al., 2007; Sela et al., 2013):
H1. Perceived price level relates negatively to idiosyncratic tariff fit.
In general, customers value saving time and spending less effort to make evaluations
(Bettman et al., 1998). As perceived pricing transparency increases, customers should have
an easier time and less effort evaluating the tariff structure and its fit with their
preferences. Prior research shows that perceived individual effort is a key determinant of
customer perceptions of idiosyncratic fit. Specifically, less effort has a positive effect on
JOSM the offer’s attractiveness and fit with customers’ preferences (Kivetz and Simonson,
29,4 2002, 2003). In line with SCT, customers tend to use the transparency of price information
to infer if a firm sets the offer’s price to be attractive for people like them and so that it is a
better fit (Sela et al., 2013):
H2. Perceived pricing transparency relates positively to idiosyncratic tariff fit.
740 Customers perceive offers that seem to fit their preferences well as more attractive for them
than for some unspecified other customer and thereby as providing them with value. In this
respect, perceived idiosyncratic fit makes the offer subjectively more valuable (e.g. Kivetz
and Simonson, 2002, 2003; Lo et al., 2007; Sela et al., 2013). Thus, the likelihood of buying a
particular tariff should increase with the level of idiosyncratic fit:
H3. Idiosyncratic tariff fit relates positively to willingness to buy.
Moderation mechanisms for perceived price level and pricing transparency

The impact of the customer’s perceived price level and pricing transparency on price
fairness and idiosyncratic fit should be moderated by customers’ service usage and
consumption goals (Figure 2), as both affect the way they evaluate offers relative to others
(Etkin and Sela, 2016; Wakefield and Inman, 2003).
Service usage. Service usage captures customers’ current and expected future usage
frequency. Customers integrate their expected usage frequency when evaluating price
fairness (Bolton and Lemon, 1999) and the idiosyncratic fit of an offer (e.g. Hamilton et al.,
2011). Intuitively, using a product more frequently increases its perceived value (Etkin and
Sela, 2016; Nunes, 2000; Tanner and Carlson, 2009), so customers evaluate products more
positively when they anticipate more frequent usage (Goodman and Irmak, 2013; Hamilton
et al., 2011). In particular, the more frequently customers believe they will use a product, the
greater their willingness to pay for it (Tanner and Carlson, 2009). Customers may even
overpay for such products, due to overestimations of usage (Nunes, 2000), leading to more
favorable price fairness (Bolton and Lemon, 1999) and idiosyncratic fit evaluations (Etkin
and Sela, 2016; Hamilton et al., 2011). That is, the perceived price level should be less (more)
diagnostic information for heavy (light) users.
Current usage also reflects customers’ experience with pricing practices. The more
frequently customers use a service, the more familiar they should become with the firm’s
pricing tactics (Wirtz and Kimes, 2007; Kuester et al., 2015). That is, heavy users should have
a better understanding of the firm’s pricing practices than light users do. This higher
experience and knowledge of heavy users should also make their perception of the firm’s
pricing transparency more diagnostic for their subsequent evaluations of price fairness and
idiosyncratic fit. Customers who are familiar with the firm’s pricing practices but still have
trouble evaluating the price of an offer (Lee and Han, 2002) likely blame the firm for using
opaque pricing techniques and thus the negative effects of these evaluations should be
stronger. Light users, in contrast, should tend to blame themselves for perceiving the tariff
as intransparent and hence will weigh this information less strongly when evaluating the
tariff. Consequently, perceived pricing transparency should be more (less) important for the
tariff evaluations of heavy (light) users:
H4. Service usage weakens the negative effects of perceived price level on (a) price
fairness and (b) idiosyncratic tariff fit and strengthens the positive effects of
perceived pricing transparency on (c) price fairness and (d) idiosyncratic tariff fit.
Consumption goals. Customers use services for two basic reasons: hedonic gratification or
utilitarian achievement (Uhrich et al., 2013). Hedonic consumption is primarily characterized
by an affective, sensory experience of esthetic or sensual pleasure, fun, fantasy and Customer tariff
enjoyment (Hirschman and Holbrook, 1982). Utilitarian consumption instead is cognitively evaluations
driven, instrumental and goal oriented. It reflects functional needs and requirements
(Strahilevitz and Myers, 1998). These consumption goals can coexist (Okada, 2005).
Customers react differently to the prices of offers depending on their consumption goals.
Prior research shows that customers tend to be less price sensitive when buying high vs low
hedonic services (Roggeveen et al., 2015; Wakefield and Inman, 2003) because savings 741
is not the main concern (Khan et al., 2004). Customers even may be willing to pay more for
highly hedonic services (Roggeveen et al., 2015; Uhrich et al., 2013). Utilitarian consumption,
on the other hand, is more rational and leads to higher price sensitivity and thus a stronger
focus on the price (Wakefield and Inman, 2003). Thus, for hedonic (utilitarian) goals, the
negative effects of perceived price level on price fairness and idiosyncratic tariff fit should
be weaker (greater).
In addition, affect-rich, hedonic services create stronger associative imagery than
utilitarian services (Khan et al., 2004). In this respect, customers striving for hedonic benefits
should base their decision on more emotional evaluation modes (Uhrich et al., 2013). Thus, if
offers prompt spontaneous evaluations, based on liking or disliking, the related evaluation
is likely intuitive (Kahneman and Frederick, 2002). Therefore, the more emotional the
evaluation (i.e. hedonic), the more relevant the customer’s perception of the firm’s pricing
transparency should be; the more rational the evaluation (i.e. utilitarian), the more people try
to assess and focus on the perceived price. Thus:
H5. Hedonic consumption goals weaken the negative effects of perceived price level on
(a) price fairness and (b) idiosyncratic tariff fit and strengthen the positive effects of
H6. Utilitarian consumption goals strengthen the negative effects of perceived price level
on (a) price fairness and (b) idiosyncratic tariff fit and weaken the positive effects of
Moderation mechanisms for price fairness and idiosyncratic tariff fit

SCT suggest that customers’ use of price fairness and idiosyncratic fit in tariff choice likely
is moderated by their expertise and preference confidence (Figure 2). Both relate to the
availability and salience of alternative reference points for comparison processes and
thus affect the use of cues and heuristics in decision making (Kivetz and Simonson, 2003;
Xia et al., 2004).
Expertise. Customer expertise is defined as the ability to perform product-related tasks
successfully (Heitmann et al., 2007). In general, customers rely on their knowledge about the
firms’ pricing practices to adjust their price fairness judgments (Bolton et al., 2003; Xia et al.,
2004). When their expertise is high, customers should engage in more analytical decision
making and, as a result, should put a higher emphasis on price fairness (Padula and
Busacca, 2005). This implies that when their expertise is high, customers rely more strongly
on their price fairness perception and find it more diagnostic for their purchase intention.
However, if such knowledge is absent or low, assessing price fairness is tough
(Sela et al., 2013). Idiosyncratic fit assessments should be easier for customers because it
does not require a high level of expertise with tariffs (Kivetz and Simonson, 2003). The
fact, however, that idiosyncratic fit only uses the customer’s individual needs as a
reference point and not external price information makes it a weaker information cue for
customers’ purchase intentions. As a result, when customers’ expertise is low, they should
rely more on their certain internal judgements with respect to fit as compared to their more
complex judgement of the fairness of the price relative to other tariffs. Thus, customers
JOSM with low (high) expertise should base their decision more (less) on idiosyncratic tariff fit
29,4 than on price fairness:
H7. Expertise (a) strengthens the positive effect of price fairness and (b) weakens the
positive effect of idiosyncratic tariff fit on willingness to buy.
Preference confidence. Preference confidence captures the degree to which customers feel
742 certain that the offer matches their preferences (Heitmann et al., 2007). When customers are
uncertain of their preferences for a tariff, they are likely to rely on a decision heuristic, such
as their perceptions of the fit of the offer to them vs to others (Lo et al., 2007; Simonson,
2005). Conversely, to the extent that a customer can meaningfully assess the offer’s
attractiveness on the basis of the absolute values, the need to rely on a proxy such as
idiosyncratic fit should diminish. Thus, customers may be able to evaluate tariffs
without relying much on idiosyncratic fit (Kivetz and Simonson, 2003). Thus, customers
with low (high) preference confidence should rely more (less) on idiosyncratic tariff fit than
on price fairness:
H8. Preference confidence (a) strengthens the positive effect of price fairness and (b)
weakens the positive effect of idiosyncratic tariff fit on willingness to buy.
The moderating role of tariff type and service type

With respect to the hypotheses with regard to context characteristics, the tariff type
(incidental vs intentional fit) and service type (traditional vs emerging) should moderate the
relative effect of idiosyncratic tariff fit vs price fairness on willingness to buy (Figure 2).
Tariff type. The fit of a tariff with customers’ preferences can be either incidental (i.e. not
triggered by a firm) or intentional (i.e. customized or designed to fit). Research suggests that
the idiosyncratic fit heuristic is affecting consumer choice to a higher extent when the offer’s
fit is incidental (Kivetz and Simonson, 2003). This counterintuitive effect reflects the notion
that customized (i.e. intentionally fitted) offers already take into account customers’ fit with
preferences (Sela et al., 2013), as customers actively participate in the tariff’s design. Such
participation is likely to be a powerful cue that the offer indeed fits their preferences
(Simonson, 2005). Thus, customers’ need to rely on the idiosyncratic fit heuristic diminishes
(vs on price fairness surges):
H9. The relative importance of idiosyncratic tariff fit as a driver of customer willingness
to buy is higher for incidental fit tariffs than for intentional fit tariffs.
Service type. Idiosyncratic fit should be more relevant in situations in which customers are
novices and uncertain about their preferences—such as in the case of emerging services—
and thus are likely to rely on a decision heuristic (Kivetz and Simonson, 2003; Lo et al., 2007;
Simonson, 2005). Thus, customers should rely more on their idiosyncratic tariff fit for
emerging (i.e. e-paper or video-on-demand) rather than traditional (i.e. wireless) services:
H10. The relative importance of idiosyncratic tariff fit as a driver of customer
willingness to buy is higher for emerging services than for traditional services.
Study 1: basic effects of price fairness and idiosyncratic fit

Method
Study 1 investigates the basic effects of price fairness and idiosyncratic tariff fit on
customers’ willingness to buy a particular tariff while holding both the objective price of the
offer and the actual fit between the offer and the customer’s preferences constant (H1–H3)
(Figure 2). To generate sufficient variation in the model variables while testing the main
effects in a controlled environment, Study 1 used an experimental approach with different Customer tariff
tariffs and service contexts as stimuli. The goal was to provide more generalizable results evaluations
than prior industry-specific studies (Figure 1). More specifically, Study 1 addresses the
context of two tariff types (i.e. flat-rate and pay-per-use tariffs), as they are the most common
tariffs in many industries (Nunes, 2000). A flat-rate tariff charges a single fixed fee for the
service, regardless of usage. Pay-per-use tariffs are variable pricing schemes with a
predefined price per consumption unit (e.g. time, editions). Study 1 considers two service 743
types in which customer face alternatives: traditional wireless (2015 US sales of $256bn) and
emerging e-paper services (sales of $26bn) (IBISWorld, 2016). Thus, tariff and service types
are manipulated in a 2 (tariff type) × 2 (service type) between-subjects design. Figure 3
shows the experimental stimuli.
The study was administered as an online survey. Each participant was presented with a
situation: their current contract (€39 per month) would soon expire, and they planned to
switch to a cheaper tariff with the same fictional service provider. Participants received an
overview of their average monthly usage behavior (Nunes, 2000; Figure 3), leading to tariffs
that would cost €30 per month (i.e. constant objective total price), independent of the tariff
and service type. To hold the objective fit between the offer and the customer’s preferences
constant, cues indicated the same non-explicit fit of all tariffs; thus, the offer provided
participants with incidental idiosyncratic fit (Sela et al., 2013). More specifically, participants
were told that the offer they received was generally appropriate given their usage behavior
and their preferences.
Participants first indicated their willingness to buy this tariff, then provided their
perceptions of the tariff’s price fairness, idiosyncratic tariff fit and price level, as well as of
the firm’s pricing transparency. Next, participants completed manipulation checks. Finally,
participants responded to several control variables, such as their age, gender, income,
education level, monthly expenditures for the depicted service and their own tariff type.
Students enrolled in different marketing courses at a university in Germany were invited to
participate in the study. In total, 958 students clicked on the invitation link, 363 responded to the
questionnaire. Participants showing extremely short response times and click through behavior
Service Type Traditional Emerging

Wireless E-Paper Video-on-Demand
Indicated Average Usage per Month (same for all scenarios)
Phone Calls (Any Network) 150 min. Daily Editions 12 Videos 4
Text Messages (Any Network) 150 Weekend Editions 4
Mobile Internet Data (High Speed) 500 MB
Tariff Type
Incidental Flat-Rate Study 1 and 2 Flat-Rate Study 1 and 2 Flat-Rate Study 2
Fit Phone Calls Unlimited Contract 30 Day Contract Contract 30 Day Contract
Tariffs Text Messages Unlimited Price 29.99 €/Month Price 7.99 €/Month
Mobile Internet Data 500 MB Incl. Tariff Details Unlimited Access to the E-Paper Tariff Details Access to 60.000 Movies, Series,
Monthly Costs € 29.99 (24 Month Contract) Unlimited Access to the Website and Documentaries and TV Shows
Unlimited Access to the App Watch Videos Unlimited Times
Pay-per-Use Study 1 and 2 Pay-per-Use Study 1 and 2 Pay-per-Use Study 2
Phone Calls 0.09 €/min. Contract No Contract Contract No Contract
Text Messages 0.09 €/Text Message Price 1.79 €/Daily Edition Price 1.99 €/Video
Mobile Internet Data 500 MB Incl. 1.99 €/Weekend Edition Tariff Details Access to 60.000 Movies, Series,
Monthly Costs € 19.99 (24 Month Contract) Tariff Details Day Access to the E-Paper, and Documentaries and TV Shows
Tariff Details 100 Inclusive Minutes Website, and App Watch Videos 48 Hours
100 Inclusive Text Messages
Cost Cap Study 2 Cost Cap Study 2 Cost Cap Study 2
Phone Calls 0.09 €/min. Contract 30 Day Contract Contract 30 Day Contract
Text Messages 0.09 €/Text Message Price 1.79 €/Daily Edition Price 1.99 €/Video
Mobile Internet Data 4.99 €/500 MB 1.99 €/Weekend Edition Tariff Details Access to 60.000 Movies, Series,
Monthly Costs € 0.00 (30 Day Contract) Tariff Details Day Access to the E-Paper, and Documentaries and TV Shows
Tariff Details € 39.00 Cost Cap Website, and App Watch Videos 48 Hours
€ 39.00 Cost Cap € 12.00 Cost Cap
Intentional Select Study 2 Select Study 2 Select Study 2
Fit Phone Calls 0.09 €/min. Contract 30 Day Contract Contract 30 Day Contract
Tariffs Text Messages 0.09 €/Text Message Price 1.79 €/Daily Edition Price 1.99 €/Video Figure 3.
Mobile Internet Data 0.24 €/MB 1.99 €/Weekend Edition Tariff Details Unlimited Access to 20.000 Movies
Tariff Details Unlimited Calls Tariff Details Unlimited Access to the E-Paper Unlimited Access to 20.000 Series Study 1/Study 2:
Unlimited Texts
1 GB Data
Unlimited Access to the Website
Unlimited Access to the App
Unlimited Access to 20.000
Documentaries and TV Shows
scenarios
Each 9.99 €/Month Each 9.99 €/Month Each 2.69 €/Month
JOSM were excluded from further analyses. A final sample of 292 graduate students (52 percent
29,4 female; Mage ¼ 26 years) were randomly assigned to the four conditions—independent of their
actual tariff or service usage. Table I presents the sample characteristics in more detail.
Measure development and assessment

Measures. All constructs were assessed with reflective multi-item measures. All scales are in
744 Appendix 1. Willingness to buy was assessed with the scale from Dodds et al. (1991). The
perceived price fairness scale covered four items used in prior studies (Bolton et al., 2010;
Campbell, 2007; Xia et al., 2004). A newly developed four-item scale captured perceived
idiosyncratic tariff fit, drawing on items of Hamilton et al. (2011) and Sela et al. (2013).
It assesses the extent to which the tariff fits the idiosyncratic benefits or needs the service
provides for the customer using it. Perceived price level was assessed with a new three-item,
semantic differential scale based on Dodds et al. (1991) and Sela et al. (2013). The scale for
perceived pricing transparency was adapted from Homburg et al. (2014).
Assessment. A confirmatory factor analysis (CFA) assessed reliability and validity of the
constructs. This model containing all latent constructs offered very good fit (comparative
fit index (CFI) ¼ 0.98, Tucker–Lewis index (TLI) ¼ 0.98, root mean square error of
approximation (RMSEA) ¼ 0.06). The measures exhibit good psychometric properties
(Bagozzi and Yi, 2012; Appendices 1 and 2) and show discriminant validity (Fornell and
Larcker, 1981; Appendix 2).
Criterion Characteristics Study 1 Study 2
Sample size N 292 528

Age (years) M 25.87 40.35
SD 8.81 12.94
Gender (%) Female 52.05 51.89
Male 47.95 48.11
Education (%) Lower level 8.56 25.19
Middle level 25.68 34.09
Higher level 65.75 40.72
Monthly income (%) Under €1,499 77.74 56.82
€1,500–€2,999 18.49 35.61
€3,000 and above 3.77 7.58
Monthly expenditures (€) Wireless
M 30.86 24.52
SD 15.10 12.65
E-paper
M 18.63 18.83
SD 12.70 11.46
Video-on-Demand
M – 25.53
SD – 18.94
a
Service Usage Wireless
M 5.00 3.80
SD 1.79 1.53
E-paper
M 2.73 3.02
SD 1.53 1.60
Video-on-demand
M – 3.00
Table I. SD – 1.65
Sample characteristics Note: aMeasurement items see Appendix 1
Common method bias diagnostics. Two analyses addressed common method concerns in the Customer tariff
relationships between the dependent measures (Podsakoff et al., 2003). First, a latent evaluations
common method factor was included in the measurement model. This factor accounts for
less than 1 percent of the variance in the indicators, indicating that common method
variance is not a serious threat. Second, a common method factor that is uncorrelated with
all other constructs and loads on every manifest variable was added to the structural model.
This common method factor reflects the variance common to all indicators. The estimated 745
path coefficients remain stable, and no significance tests were affected.
Distinction from customer value. An additional test evaluated whether price fairness and
idiosyncratic fit were conceptually distinct from a commonly used measure of value. In
general, value captures a mental trade-off between monetary sacrifice and benefits (Dodds
et al., 1991). Conceptually, value does not capture a social comparison in terms of preference
(Kivetz and Simonson, 2003), or a reference price comparison (Xia et al., 2004).
Three empirical analyses were conducted to validate the difference between price
fairness, idiosyncratic tariff fit and value. First, based on a CFA with the model constructs
and a four-item value measure (AVE ¼ 0.83; CR ¼ 0.95) adapted from Dodds et al. (1991) the
Fornell–Larcker criterion was met for every pair of these constructs. Second, an alternative
model using value instead of idiosyncratic tariff fit as a determinant of willingness to buy
was estimated (in addition to price fairness). The variance of willingness to buy explained
by a model including value was lower than for idiosyncratic fit. Third, when considering
value as a determinant of willingness to buy in addition to price fairness and idiosyncratic
fit, the effect of value on willingness to buy is insignificant.
Results and discussion

Manipulation checks. Participants had to indicate whether the total price they had to pay for
the tariff in the scenario depended on their service usage (1 ¼ “do not agree at all,”
7 ¼ “totally agree”): they rated the total price of the flat rate significantly less dependent on
their usage than the price of the pay-per-use tariff (Mflat rate ¼ 2.17, Mpay-per-use ¼ 5.18;
F(1, 290) ¼ 175.61, p o0.01). In addition, participants correctly recalled whether they were
confronted with a wireless (97 percent) or e-paper (100 percent) service (χ2 ¼ 272.66,
p o0.01). Thus, all manipulations were successful.
Main results. To address the main effect hypotheses and basic effects in the framework,
structural equation modeling (SEM) with Stata 13 was applied. The model fits the data well
(CFI ¼ 0.97, TLI ¼ 0.97, RMSEA ¼ 0.07). The results also showed strong support
for all main effects. First, all established basic effects were confirmed (Figure 4, Study 1).
Determinants Tariff Evaluation Outcome
Perceived Price #11 = –0.76**/–0.54** Price Fairness

Level
"1 $31 = 0.58**/0.14**
!1
#21 = –0.65**/–0.42** R2 = 0.64/0.69
H1
Model Fit Indices:
Willingness to Buy
CFI = 0.97/0.97
"3
TLI = 0.97/0.96
RMSEA = 0.07/0.07
#12 = 0.14**/0.31** H3
Perceived Pricing H2 Idiosyncratic
$32 = 0.29**/0.75**
Transparency Tariff Fit
!2 #22 = 0.25**/0.35** "2 Figure 4.
Study 1/Study 2:
model estimation for
Notes: The solid lines indicate the hypothesized main effects; dotted lines indicate basic main main effects
effects. Completely standardized coefficients are shown. **p < 0.01
JOSM Second and in support of H1, results showed a negative effect of perceived price level on
29,4 idiosyncratic tariff fit (γ ¼ −0.65, po 0.01). Also in line with H2, perceived pricing
transparency positively affected idiosyncratic tariff fit (γ ¼ 0.25, p o0.01), and idiosyncratic
tariff fit positively affected willingness to buy (β ¼ 0.29, p o0.01), confirming H3.
A mediation analysis further showed that price fairness and idiosyncratic tariff fit fully
mediated the effects of perceived price level and pricing transparency on willingness to buy
746 which underlines the validity of the main effects model (Zhao et al., 2010). Including direct
effects of perceived price level and pricing transparency on willingness to buy did not
improve model fit (Δχ2 ¼ 3.12, df ¼ 2, p W0.10) as the direct effects were insignificant.
Additional analyses. To provide a direct test of the experimental manipulation on the
dependent variables, a 2 × 2 analysis of variance (ANOVA) with tariff type and service type
as the independent variables and the constructs of the basic model as the dependent
variables was conducted (see Table II, Study 1). The control variables did not show a
significant influence and thus were excluded from the analysis.
The ANOVA revealed significant main effects of the tariff type on all dependent
variables. Compared with the flat-rate tariff, the pay-per-use tariff caused customers to
perceive lower price fairness (Mflat rate ¼ 4.58, Mpay-per-use ¼ 3.50), idiosyncratic tariff fit
(Mflat rate ¼ 4.26, Mpay-per-use ¼ 3.29), and a lower willingness to buy (Mflat rate ¼ 4.51,
Mpay-per-use ¼ 3.45). The same holds for perceived price level and perceived pricing
transparency. Thus, in line with prior work (e.g. Lambrecht and Skiera, 2006), participants
preferred the flat-rate over the pay-per-use tariff, even though the objective price and actual
fit were identical.
The results also revealed some significant interaction effects of the tariff and service
type, in particular, with respect to price fairness, idiosyncratic tariff fit and willingness to
buy (see Table II). Follow-up contrasts indicated that the preference for the flat rate was
stronger for the wireless telecommunications than the e-paper service. In particular, for
wireless telecommunications, the flat-rate tariff was more effective in enhancing perceptions
of price fairness (Mflat rate ¼ 5.00, Mpay-per-use ¼ 3.41; F(1, 288) ¼ 33.11, p o0.01),
idiosyncratic tariff fit (Mflat rate ¼ 4.63, Mpay-per-use ¼ 3.09; F(1, 288) ¼ 34.92, p o0.01), and
willingness to buy (Mflat rate ¼ 5.00, Mpay-per-use ¼ 3.24; F(1, 288) ¼ 35.75, p o0.01).
Discussion. Study 1 provides support for the basic prediction that both price fairness and
idiosyncratic tariff fit indeed are key elements of customers’ tariff evaluations and trigger
their subsequent willingness to buy a particular tariff. In addition, the customer’s perception
of the price of the tariff and the firm’s pricing transparency are the underlying behavioral
mechanisms. Finally, both price fairness and idiosyncratic tariff fit are full mediators for
willingness to buy, underscoring the importance of considering both tariff evaluation
concepts in a tariff choice context. In terms of the tariff, results imply a preference for
flat-rate tariffs which particularly holds for the wireless service due to a consistent positive
evaluation across all variables.
Study 2: customer and context characteristics as moderating mechanisms

The main goal of Study 2 is to examine the context dependence of the roles of price fairness
and idiosyncratic fit for customers’ tariff evaluations. Study 2 thus addresses hypotheses
H4–H10 (Figure 2). In addition, Study 2 relies on a representative consumer sample to
increase the external validity of the findings. Finally, as an additional service context, the
increasingly popular video-on-demand services (sales of $3bn) is included (IBISWorld, 2016).
Method
Study 2 also considers cost-cap and select tariffs in addition to the tariffs used in Study 1.
A cost-cap tariff mimics a pay-per-use tariff until the total costs exceed a predefined cost
ANOVA Results (F-value)
Interaction
Wireless E-paper Video-on-demand Main effects effect
Flat Pay-per- Cost Flat Pay-per- Cost Flat Pay-per- Cost
Dependent variable rate use cap Select rate use cap Select rate use cap Select Tariff Service
Study 1
Perceived price levelb 3.48 4.76 – – 4.42 4.99 – – – – – – 41.67** 16.63** 5.96*
(1.25) (1.31) (1.24) (1.07)
Perceived pricing 4.84 3.27 – – 5.34 4.08 – – – – – – 63.24** 13.48** 0.74
transparencya (1.71) (1.41) (1.3) (1.57)
Price fairnessa 5.00 3.41 – – 4.15 3.60 – – – – – – 30.03** 2.85 6.92**
(1.49) (1.77) (1.68) (1.72)
a
Idiosyncratic tariff fit 4.63 3.09 – – 3.89 3.49 – – – – – – 27.38** 0.89 9.59**
(1.58) (1.40) (1.56) (1.76)
Willingness to buya 5.00 3.24 – – 4.01 3.66 – – – – – – 25.60** 1.83 11.34**
(1.78) (1.84) (1.77) (1.71)
Study 2
Perceived price levelb 4.50 4.57 4.44 4.46 4.74 4.61 4.57 4.21 3.84 4.01 3.69 3.76 1.53 24.80** 0.62
(1.05) (1.20) (0.92) (1.09) (1.20) (0.91) (0.91) (0.92) (1.23) (1.05) (1.07) (1.10)
Perceived pricing 4.52 3.69 3.75 4.03 4.67 4.04 4.19 4.79 5.02 4.98 5.13 4.54 3.09* 19.68** 2.27*
transparencya (1.56) (1.46) (1.60) (1.44) (1.39) (1.40) (1.33) (1.29) (1.16) (1.42) (1.23) (1.40)
Price fairnessa 3.87 3.40 3.92 3.78 3.88 3.56 3.87 4.65 5.02 4.54 4.82 4.75 3.19* 23.30** 1.27
(1.51) (1.35) (1.64) (1.68) (1.51) (1.53) (1.55) (1.35) (1.49) (1.57) (1.44) (1.38)
Idiosyncratic tariff fita 3.77 3.13 3.74 3.48 3.70 3.55 3.72 4.49 4.73 4.08 4.26 4.49 3.06* 13.16** 1.33
(1.72) (1.46) (1.77) (1.60) (1.55) (1.58) (1.71) (1.21) (1.54) (1.72) (1.82) (1.52)
Willingness to buya 3.60 2.82 3.59 2.97 3.54 3.16 3.52 4.26 4.36 4.03 3.88 4.31 2.46 12.47** 1.98
(1.89) (1.64) (1.72) (1.74) (1.68) (1.58) (1.71) (1.56) (1.58) (1.83) (2.02) (1.46)
b
Notes: ANOVA, analysis of variance. SD are in parentheses. aSeven-point Likert-type rating scales, with anchors at 1 ¼ “do not agree at all” and 7 ¼ “do totally agree”
seven-point semantic differential scales with anchors at 1, 4, and 7. *p o0.05; **p o 0.01
747
evaluations
Customer tariff
Study 1 and Study 2

ANOVA results for
Means, SD and
Table II.
JOSM cap, at which point the tariff turns into a flat rate (Krämer and Wiewiorra, 2012). In addition,
29,4 service providers often allow customers to customize their tariffs by selecting individual
options from a menu (Iyengar et al., 2008), which constitutes a select tariff. By doing so,
customer perceptions of incidental (i.e. flat-rate, pay-per-use and cost-cap tariffs) vs
intentional fit tariffs (i.e. select tariffs) can be compared. As a result, the experiment involved
a 4 (tariff type) × 3 (service type) between-subjects design. The 12 experimental conditions
748 are shown in Figure 3.
As in Study 1, participants were told that their current service contract was expiring,
and they were looking for a new and cheaper contract with the same provider. The
total costs were €39 for the current wireless or e-paper contracts and €12 for the current
video-on-demand contract. As in Study 1, the participants’ usage behavior was fixed, so
each new tariff would cost €30 per month in the wireless and e-paper scenarios and
€8 per month in the video-on-demand scenario, independent of the tariff type. Cues again
indicated the same non-explicit fit of the offer to hold the objective fit constant; though the
offer provided idiosyncratic fit, for the flat-rate, pay-per-use and cost-cap tariffs, this fit was
incidental. The customized offer (i.e. select tariff ) allowed participants to choose among
add-on options and thus provided intentional fit (Sela et al., 2013).
The consumer sample was collected by an established online panel provider. Panel
participants received a monetary incentive for participation. In total, 2,734 panelists
clicked on the invitation link. After the screen out tests in terms of demographics, 750
panelists responded to the full questionnaire. The final usable sample was n ¼ 528 after
excluding those participants who clicked through the questionnaire or showed very short
response times. A comparison of the distribution of major demographic variables
indicates that the sample is structurally equivalent to the German population. The null
hypothesis of equal proportions across the sample and the population was not rejected
(χ2 ¼ 52.45, df ¼ 89, p W 0.99).
Participants were randomly assigned to the 12 experimental conditions—independent of
their actual tariff or service usage. Participants who were assigned to the select tariff could
choose among three add-on options. As in Study 1, the constructs of the basic model were
measured. In addition, participants had to indicate their service usage, consumption goals,
expertise and preference confidence. After responding to the manipulation checks,
participants provided their age, gender, income, education level, monthly expenditures for
the service and own tariff type.
Measure development and assessment

Study 2 uses the same scales from Study 1. A new scale for service usage was developed,
with each two items to capture current usage (Hamilton et al., 2011) and expected future
usage (Etkin and Sela, 2016), as well as one item capturing relative usage compared with
peers (Etkin and Sela, 2016). The HED/UT scale by Voss et al. (2003) was used to measure
consumption goals. For expertise and preference confidence, scales provided by Heitmann
et al. (2007) were used. A CFA shows that the measures exhibited good psychometric
properties (Bagozzi and Yi, 2012; Appendices 1 and 2), and the measurement model
provided very good fit (CFI ¼ 0.97, TLI ¼ 0.97, RMSEA ¼ 0.04), with no problems with
respect to discriminant validity (Fornell and Larcker, 1981; Appendix 2).
Results and discussion

Manipulation checks. All manipulations worked as intended. An ANOVA with the tariff type
as the independent variable and the manipulation check of Study 1 as the dependent
variable indicated a significant main effect of tariff type (F(3, 524) ¼ 21.82, p o0.01).
Follow-up contrasts showed that respondents rated the total price of the flat-rate tariff
(Mflat ¼ 3.06) as significantly less dependent on their usage than that of any other
tariff: pay-per-use (Mpay ¼ 4.83; F(1, 524) ¼ 56.17, p o0.01), cost-cap (Mcost ¼ 4.52; Customer tariff
F(1, 524) ¼ 39.80, p o 0.01), and select (Mselect ¼ 4.11; F(1, 524) ¼ 20.18, p o0.01). evaluations
Participants also correctly recalled whether they considered wireless (92 percent), e-paper
(93 percent) or video-on-demand (90 percent) services (χ2 ¼ 811.71, p o0.01).
Main effects. SEM with Stata 13 was used to reexamine and validate the basic model
from Study 1. The global fit of the model was good (CFI ¼ 0.97, TLI ¼ 0.96, RMSEA
¼ 0.07). All the established basic effects were supported and results also supported H1–H3 749
(Figure 4, Study 2): the customer’s perceived price level again had a negative and significant
effect on idiosyncratic tariff fit (γ ¼ −0.42, p o0.01). Perceived pricing transparency related
positively to idiosyncratic tariff fit (γ ¼ 0.35, p o0.01). Again, idiosyncratic tariff fit
positively affected willingness to buy (β ¼ 0.75, p o0.01). As in Study 1 price fairness and
idiosyncratic tariff fit fully mediated the effects of perceived price level and pricing
transparency on willingness to buy (Zhao et al., 2010).
Moderating effects. To test the moderating hypotheses of customer characteristics
(H4–H8), latent interaction terms between the moderator and the predictors as drivers of
price fairness and idiosyncratic tariff fit (or willingness to buy) were included. The latent
interaction terms were measured with indicators that were products of the mean-centered
indicators of the latent variables involved in the interaction (Marsh et al., 2006). Then, the
moderator and corresponding latent interaction terms were added as additional antecedents
of price fairness and idiosyncratic tariff fit (or willingness to buy) (Figure 2). Two separate
structural equation models were estimated addressing the moderating effects of service
usage (H4) and of hedonic and utilitarian consumption goals (H5 and H6) on the effects of
perceived price level and pricing transparency on both price fairness and idiosyncratic tariff
fit. Two separate models were estimated addressing the moderating effects of expertise (H7)
and preference confidence (H8) on the effects of price fairness and idiosyncratic tariff fit on
willingness to buy. The four models offered good or acceptable model fit (Table III). To
interpret the interaction effects, the effects of the predictors on the dependent variables were
plotted for different levels of the moderators, displaying the simple slope of either perceived
price level or pricing transparency (price fairness or idiosyncratic tariff fit) at 1 SD below
and above the mean of the respective moderator (Figures 5-7).
In line with H4a and H4b, the perceived price level × service usage interaction positively
affected price fairness (γ ¼ 0.22, p o0.01) and idiosyncratic tariff fit (γ ¼ 0.19, p o0.01)[1].
Thus, the negative effects of perceived price level on price fairness and idiosyncratic tariff
fit were weaker at high levels of service usage. The interaction between perceived pricing
transparency and service usage positively affected price fairness (γ ¼ 0.10, p o0.05) and
idiosyncratic tariff fit (γ ¼ 0.15, p o0.01), confirming H4c and H4d (Table III). The positive
effects of perceived pricing transparency on price fairness and idiosyncratic tariff fit were
stronger with high levels of service usage (Figure 5).
The interaction of perceived price level × hedonic goal positively affected price fairness
(γ ¼ 0.46, po0.01) and idiosyncratic tariff fit (γ ¼ 0.43, po0.01), whereas the interaction of
perceived price level × utilitarian goal negatively affected price fairness (γ ¼ −0.43, po0.01)
and idiosyncratic tariff fit (γ ¼ −0.47, po0.01). Results thus find support for H5a and H5b
and H6a and H6b. Moreover, the interaction between perceived pricing transparency and
hedonic goal positively affected price fairness (γ ¼ 0.38, po0.01) and idiosyncratic tariff fit
(γ ¼ 0.37, po0.01), whereas the interaction of perceived pricing transparency × utilitarian
goal negatively affected price fairness (γ ¼ −0.37, po0.01) and idiosyncratic tariff fit
(γ ¼ −0.36, po0.01), in support of H5c and H5d and H6c and H6d (Table III). When
customers emphasize hedonic goals, perceived price level has almost no effect on price
fairness and idiosyncratic tariff fit, but the opposite holds for perceived pricing transparency.
Hedonic customers even may be willing to pay more. When customers put a strong emphasis
JOSM
29,4 Moderator Hypothesis Predictor
Predictor → Dependent variable
Moderator Interaction Support
Perceived price level → Price fairness

Service usage H4a –0.63** 0.28** 0.22** |
Hedonic consumption goal H5a –0.37** 0.03 0.46** |
Utilitarian consumption goal H6a 0.13**
750 –0.37** –0.43**
Perceived price level → Idiosyncratic tariff fit
|
Service usage H4b –0.51** 0.41** 0.19** |

Hedonic consumption goal H5b –0.27** 0.02 0.43** |
Utilitarian consumption goal H6b –0.27** 0.23** –0.47** |
Perceived pricing transparency → Price fairness
Service usage H4c 0.23** 0.28** 0.10* |
Hedonic consumption goal H5c 0.26** 0.03 0.38** |
Utilitarian consumption goal H6c 0.26** 0.13** –0.37** |
Perceived pricing transparency → Idiosyncratic tariff fit
Service usage H4d 0.26** 0.41** 0.15** |
Hedonic consumption goal H5d 0.26** 0.02 0.37** |
Utilitarian consumption goal H6d 0.26** 0.23** –0.36** |
Price fairness → Willingness to buy
Expertise H7a 0.22** 0.11** 0.20** |
Preference confidence H8a 0.16** 0.21** 0.14** |
Idiosyncratic tariff fit → Willingness to buy
Expertise H7b 0.66** 0.11** –0.14** |
Preference confidence H8b 0.52** 0.21** –0.10** |
Model fit indices Service usage Hedonic and utilitarian consumption goals
CFI 0.95 0.90
TLI 0.94 0.90
RMSEA 0.06 0.08
Expertise Preference confidence
Table III. CFI 0.92 0.93
Study 2: results of TLI 0.91 0.92
hypotheses testing for RMSEA 0.08 0.08
moderating effects Notes: Completely standardized coefficients are shown. *p o0.05; **p o0.01
on utilitarian goals, perceived price level instead has a strong effect on price fairness and
idiosyncratic tariff fit; perceived pricing transparency has no effect (Figure 6).
The price fairness × expertise interaction term positively affected willingness to buy
(γ ¼ 0.20, p o0.01), in support of H7a. The interaction term between idiosyncratic tariff fit
and expertise also negatively affected willingness to buy (γ ¼ −0.14, po 0.01), confirming
H7b. The interaction term of price fairness × preference confidence positively affected
willingness to buy (γ ¼ 0.14, p o0.01), in support of H8a. Also in line with H8b, the
idiosyncratic tariff fit × preference confidence interaction negatively affected willingness to
buy (γ ¼ −0.10, p o0.05) (Table III). A high level of expertise and preference confidence
strengthens (weakens) the positive effects of price fairness (idiosyncratic tariff fit) on
willingness to buy (Figure 7).
To test the relative effect of idiosyncratic tariff fit (in comparison with price fairness) on
willingness to buy by the tariff and service type (H9 and H10), the main effects model was
estimated for the corresponding subsamples using multiple-group SEM. H9 and H10 were
tested in separate analyses. Then, the relative importance, IMPitf,g, of the idiosyncratic tariff
fit for willingness to buy was computed in the subsamples (tariff type: group ¼ 1 for
incidental fit tariffs, i.e. flat rate, pay-per-use and cost cap, group ¼ 2 for intentional fit
tariffs, i.e. select tariff; service type: group ¼ 1 for traditional services, i.e. wireless service,
A: Perceived Price Level × Service B: Perceived Price Level × Service Usage Customer tariff
Usage on Price Fairness (H4a) on Idiosyncratic Tariff Fit (H4b) evaluations
2.5 2.5
2 2
1.5 1.5
Idiosyncratic Tariff Fit

1 1
Price Fairness
0.5 0.5
0 0
–0.5 –0.5 751
–1 –1
–1.5 –1.5
–2 –2
–2.5 –2.5
Low High Low High
Price Level Price Level Price Level Price Level
Low Service Usage High Service Usage
C: Perceived Pricing Transparency × Service D: Perceived Pricing Transparency × Service

Usage on Price Fairness (H4c) Usage on Idiosyncratic Tariff Fit (H4d )
2.5 2.5
2 2
1.5 1.5
1 1
Price Fairness
0.5 0.5
0 0
–0.5 –0.5
–1 –1
–1.5 –1.5
–2 –2
–2.5 –2.5
Low Pricing High Pricing Low Pricing High Pricing
Transparency Transparency Transparency Transparency
Figure 5.
Low Service Usage High Service Usage Interaction effects
of service usage
Note: This figure depicts the effects when the moderator is 1.0 SD above and below its mean
group ¼ 2 for emerging services, i.e. e-paper and video-on-demand). With the respective
parameter estimates, IMPitf,g is the ratio of the effect of idiosyncratic tariff fit to the sum of
the effects of idiosyncratic tariff fit (i.e. β32g) and price fairness (i.e. β31g) on the dependent
variable willingness to buy (Table IV ).
χ2 difference tests (using the procedure of Homburg et al., 2007) were used to test whether
the relative importance of idiosyncratic tariff fit as a driver of willingness to buy differs
between the subsamples. A multiple-group SEM with corresponding constraints that forced
IMPitf,g to be equal across the subsamples was estimated. If the difference between the χ2
goodness-of-fit statistics from both analyses was significant, the relative importance of
idiosyncratic tariff fit was different in the corresponding subsamples.
Table IV summarizes the results. The results showed that the relative importance of
idiosyncratic tariff fit as a driver of willingness to buy significantly increases for incidental
fit tariffs (89 percent) and emerging service types (89 percent). The relatively stronger effect
of idiosyncratic tariff fit on willingness to buy becomes less pronounced for the intentional
fit tariff (58 percent) and traditional services (74 percent). Thus, idiosyncratic fit is
particularly important for service offers that provide incidental rather than intentional fit,
supporting H9. In line with H10, idiosyncratic fit is more relevant for emerging services
rather than traditional services[2].
Additional analyses. To provide a direct test of the experimental manipulation on the
dependent variables, a 4 × 3 ANOVA with tariff type and service type as the independent
29,4
752
JOSM
Figure 6.
consumption goals
Interaction effects of
Hedonic Consumption Goal (HED) Utilitarian Consumption Goal (UT)
A: Perceived Price Level × HED B: Perceived Price Level × HED A: Perceived Price Level × UT B: Perceived Price Level × UT
on Price Fairness (H5a) on Idiosyncratic Tariff Fit (H5b) on Price Fairness (H6a) on Idiosyncratic Tariff Fit (H6b)
2 2 2 2
1.5 1.5 1.5 1.5
1 1 1 1
0.5 0.5 0.5 0.5
0 0 0 0
–0.5 –0.5 –0.5 –0.5
Price Fairness
Price Fairness
–1 –1 –1 –1

–1.5 –1.5 –1.5 –1.5
–2 –2 –2 –2
Low High Low High Low High Low High
Price Level Price Level Price Level Price Level Price Level Price Level Price Level Price Level
Low HED High HED Low UT High UT
C: Perceived Pricing Transparency × HED D: Perceived Pricing Transparency × HED C: Perceived Pricing Transparency × UT D: Perceived Pricing Transparency × UT
on Price Fairness (H5c) on Idiosyncratic Tariff Fit (H5d) on Price Fairness (H6c) on Idiosyncratic Tariff Fit (H6d )
2 2 2 2
1.5 1.5 1.5 1.5
1 1 1 1
0.5 0.5 0.5 0.5
0 0 0 0
–0.5 –0.5 –0.5 –0.5
Price Fairness
Price Fairness
–1 –1 –1 –1

–1.5 –1.5 –1.5 –1.5
–2 –2 –2 –2
Low Pricing High Pricing Low Pricing High Pricing Low Pricing High Pricing Low Pricing High Pricing
Transparency Transparency Transparency Transparency Transparency Transparency Transparency Transparency
Low HED High HED Low UT High UT
A: Price Fairness × Expertise B: Idiosyncratic Tariff Fit × Expertise Customer tariff
on Willingness to Buy (H7a) on Willingness to Buy (H7b) evaluations
2 2
1.5 1.5
1 1
Willingness to Buy
Willingness to Buy
0.5 0.5
0 0
–0.5 –0.5 753
–1 –1
–1.5 –1.5
–2 –2
Low High Low High
Price Fairness Price Fairness Idiosyncratic Tariff Fit Idiosyncratic Tariff Fit
Low Expertise High Expertise
C: Price Fairness × Preference D: Idiosyncratic Tariff Fit × Preference

Confidence on Willingness to Buy (H8a) Confidence on Willingness to Buy (H8b)
2 2
1.5 1.5
1 1
Willingness to Buy
Willingness to Buy
0.5 0.5
0 0
–0.5 –0.5
–1 –1
–1.5 –1.5
–2 –2
Low High Low High
Price Fairness Price Fairness Idiosyncratic Tariff Fit Idiosyncratic Tariff Fit Figure 7.
Interaction effects of
Low Preference Confidence High Preference Confidence expertise and
preference confidence
variables and the constructs of the basic model as the dependent variables was conducted
(see Table II, Study 2). The control variables did not show a significant influence and thus
were excluded from the analysis.
Results showed significant main effects of the tariff type on price fairness, idiosyncratic
tariff fit, and willingness to buy. According to the follow-up contrasts, compared with the
pay-per-use tariff, the other tariff types encouraged customers to perceive higher price
fairness (Mpay-per-use ¼ 3.88 vs Mflat rate ¼ 4.27, F(1, 516) ¼ 5.19, p o0.05; Mcost-cap ¼ 4.19,
F(1, 516) ¼ 3.89, p o0.05; Mselect ¼ 4.35, F(1, 516) ¼ 8.47, p o0.01), idiosyncratic tariff fit
(Mpay-per-use ¼ 3.63 vs Mflat rate ¼ 4.08, F(1, 516) ¼ 5.81, p o0.05; Mcost-cap ¼ 3.90,
F(1, 516) ¼ 2.52, p ¼ 0.11; Mselect ¼ 4.11, F(1, 516) ¼ 7.87, p o0.01), and willingness to buy
(Mpay-per-use ¼ 3.39 vs Mflat rate ¼ 3.84, F(1, 516) ¼ 5.53, p o0.05; Mcost-cap ¼ 3.66,
F(1, 516) ¼ 2.31, p ¼ 0.13; Mselect ¼ 3.79, F(1, 516) ¼ 5.63, p o0.05), though the objective price
and actual fit were identical for customers. These results also indicate that tariff preferences
significantly vary across industries. For traditional services, flat-rate and cost-cap tariffs
appear more effective regarding price fairness, idiosyncratic tariff fit, and willingness to
buy, but firms in emerging services contexts profit from flat-rate and select tariffs[3].
Discussion. Study 2 provides more generalizable support for the basic model. However,
these effects are highly context dependent: the negative effects of the customer’s perceived
price level only occur when customers predict a low usage and strive for utilitarian goals.
In this case, the customer’s perceived pricing transparency has no or almost negative effects
29,4
754
JOSM
Table IV.
group analysis
Results of multiple
Moderator Relative Importance of Idiosyncratic Tariff Fit (IMPitf,g) Δχ2,
IMPitf;g ¼ b32g =ðb32g þ b31g Þ % 100% Δdf ¼3
Tariff type Incidental (g 1) Intentional (g 2)
! "
¼ ¼
g ¼ 1 for incidental fit (i.e. flat rate, pay-per-use and b321 =ðb321 þ b311 Þ ¼ 0:81=ð0:81þ 0:10Þ ¼ 89% b322 =ðb322 þb312 Þ ¼ 0:49=ð0:49þ 0:35Þ ¼ 58% 65.12
p o0.01
! " ! "
cost-cap) tariffs, g ¼ 2 for intentional fit (i.e. select)

! " ! "
tariffs
Service type Traditional Emerging
g ¼ 1 for traditional (i.e. wireless) services, g ¼ 2 for b321 =ðb321 þ b311 Þ ¼ 0:65=ð0:65þ 0:22Þ ¼ 74% b322 =ðb322 þb312 Þ ¼ 0:78=ð0:78þ 0:09Þ ¼ 89% 47.36
emerging (i.e. e-paper and video-on-demand) services p o0.01
! (g ¼ 1)" ! " ! (g ¼ 2) " ! "
on tariff evaluation. Conversely, the positive effects of perceived pricing transparency only Customer tariff
hold for heavy users and hedonic goals. Under these conditions, perceived price level has no evaluations
or almost positive effects on tariff evaluation. Idiosyncratic tariff fit is particularly
important for incidental fit tariffs and emerging services and in situations in which
customers lack reference prices based on their expertise and are uncertain about
preferences. Results show that customers’ preferences vary significantly across industries.
In traditional service settings, flat rates and cost-cap tariffs are more effective, whereas for 755
emerging services, firms profit from select tariffs and flat rates.
General discussion
Summary of the findings
Cues that induce price fairness and idiosyncratic fit evaluations are increasingly prevalent
in many service contexts. The goal of this research was to provide a better understanding of
how customers’ tariff evaluations are affected by the complex interplay of price fairness and
idiosyncratic fit with customer and context characteristics. These issues are examined
across two experimental studies capturing three service contexts, in which customers
confront a range of tariffs.
The results generally show that customers judge tariffs on the basis of both price
fairness and idiosyncratic tariff fit, driven by their perceptions of price level and pricing
transparency. These effects are moderated by the customers’ service usage and
consumption goals. The effects of price fairness and idiosyncratic tariff fit on willingness
to buy are moderated by customers’ expertise and preference confidence. In addition, the
effectiveness of price fairness and idiosyncratic tariff fit for tariff choice critically depends
on the tariff type and service context.
Theoretical implications
The results provide a better understanding of customer tariff choice and the effects of the
firm’s pricing, promotion and framing tactics on price fairness and the idiosyncratic fit
heuristic. First, this study addresses calls to examine the complex psychological
mechanisms that underlie customer tariff choice (Ascarza et al., 2012; Goettler and Clay,
2011; Uhrich et al., 2013). In this respect, both idiosyncratic tariff fit and price fairness are
major concepts of customers’ tariff evaluations and trigger subsequent choices.
Idiosyncratic fit is particularly important when customers face uncertainty about billing
amounts (Nunes, 2000) and an overload of multiple tariff types in different industries
(Homburg et al., 2014)—that is, in situations in which customers do not have strong
reference prices to form their price fairness judgments. Previous studies focused on either
idiosyncratic fit (e.g. Lo et al., 2007) or price fairness (e.g. Homburg et al., 2014) and thus have
not accounted for the complex interplay between both in the context of tariff choice.
Second, prior research on tariff choice has offered conflicting views on the effectiveness
of different tariff types in different industries. For example, several studies show that
customers have a general preference for flat rates over pay-per-use tariffs (e.g. Lambrecht
and Skiera, 2006) but those preferences vary across service contexts (Uhrich et al., 2013).
Other studies argue that customers generally prefer multi-part to linear tariffs. This paper
considers a broader set of tariff types (Ascarza et al., 2012), and thus provide both more
specific and generalizable findings. Results affirm that customers evaluate flat-rate tariffs
more favorably than pay-per-use tariffs, but the same holds for customer perceptions of
cost-cap and select tariffs. In this respect, the results imply that firms can profit from both
linear and multi-part tariffs. Consistently, customers tend to associate pay-per-use tariffs
with more complex and expensive prices, less transparent price information, and thus less
fair prices and less fit with their preferences. Results show that customers’ preferences can
JOSM vary significantly across industries. For traditional services, flat rates and cost-cap tariffs
29,4 are more effective, whereas for emerging services, firms profit from select tariffs and flat
rates. This paper underlines the need to additionally consider the distinction between
incidental vs intentional fit in the context of tariff choice as the specific type of fit—and not
fit per se—affects customer evaluations of different service tariffs. Idiosyncratic fit is
particularly important when customers evaluate incidental (i.e. flat-rate, pay-per-use and
756 cost-cap tariffs) rather than intentional (i.e. select tariff ) fit tariffs. Thus, the results confirm
the seemingly counterintuitive idea proposed by Kivetz and Simonson (2003, p. 465) that the
idiosyncratic fit heuristic is more effective when it is “incidental, self-generated, and/or occur
[s] spontaneously, without being triggered or highlighted by the seller.” Similarly,
idiosyncratic fit is more relevant in situations in which customers are novices and uncertain
about their preferences (Kivetz and Simonson, 2003; Lo et al., 2007; Simonson, 2005), such as
in the case of the new service offers. In this respect, results highlight that there are many
common “conditions under which incidental opportunities are better received than
premeditated ones” (Sela et al., 2013, p. 703).
Third, this paper contributes to research on price fairness and the idiosyncratic fit
heuristic by investigating how customer characteristics moderate the links between the
drivers and outcomes of price fairness and idiosyncratic fit perceptions. Specifically, two
key research gaps are addressed by examining “factors that moderate the weight of
idiosyncratic fit in judgment and decision making, such as context and task
characteristics […], individual differences […], and cultural norms” (Kivetz and
Simonson, 2003, p. 464), and “factors that influence price fairness judgments […]
e.g., social norms, consumer knowledge, individual characteristics” (Xia et al., 2004, p. 10).
In turn, results show that heavy users and customers striving for hedonic pleasure tend to
focus less on their perceptions of the tariff’s price and more on their perceptions of the
firms’ pricing transparency. Previous studies of the effects of customers’ overestimation of
usage (e.g. Goodman and Irmak, 2013; Nunes, 2000) and consumption goals
(e.g. Roggeveen et al., 2015; Wakefield and Inman, 2003) mainly focus on overpayment
(i.e. price level effects). This paper shows that customers’ focus on the perceived
transparency of the provided price information also increases with higher usage levels
and hedonic goals. Furthermore, this paper underlines that there are both positive and
negative effects of usage frequency judgments and consumption goals on offer evaluation
(Etkin and Sela, 2016). In this respect, the positive effects of high usage levels or hedonic
goals can backfire if the firms’ pricing is opaque. In addition, experts and
preference-confident customers tend to focus more on price fairness and less on
idiosyncratic fit in their purchase decisions. In line with the results, tariff choice research
thus needs to carefully consider “the conditions that affect the relative strength of forces
from […] idiosyncratic fit, and perceptions of fairness” (Lo et al., 2007, p. 140).
Managerial implications
Cues to increase customers’ price fairness and idiosyncratic fit evaluations are pervasive in
tariffs in many service industries. However, the effectiveness of these cues critically depends
on customer, tariff and context characteristics. This research offers strategies to manage the
communication and pricing of tariffs. First, firms need to be aware that experts and
preference-confident customers base their decisions more on “rational” price fairness
judgments, whereas novice customers focus more on their idiosyncratic fit with the tariff.
Firms in emerging service industries could increase customers’ purchase intentions by
designing tariffs that foster perceived fit (but without explicitly highlighting that design). In
contrast, for traditional services, managers should foster favorable price fairness judgments
by relying on cues that focus on positive price comparisons (e.g. reference prices of
competitors, best price tags). Because idiosyncratic tariff fit has a key role for incidental fit
tariffs, providing customers with cues of unintended, idiosyncratic fit (e.g. designed for an Customer tariff
“average” person) may increase idiosyncratic tariff fit even further. In contrast, price evaluations
fairness judgments are more important for intentional fit tariffs, so cues to reference points
(e.g. reference prices for add-on options) may increase price fairness further.
Second, firms need to understand that the impact of the same price-related factors—such
as their customers’ perceptions of the tariff’s price and the firm’s pricing transparency—on
tariff evaluations varies across different customers. Heavy users tend to be less price sensitive 757
and more focused on transparent pricing tactics, so firms can charge a price premium for
providing transparent price information. For example, they might use frequency cues or tools
that lead customers to reflect on their own usage frequency in advance of their tariff
evaluation. To the extent that firms can track customers’ usage, they also could target heavy
users with more transparent but more expensive tariffs. Moreover, firms offering hedonic
services, in contrast to utilitarian service providers, enjoy a higher natural level of less
price-sensitive customers. Still, firms in all fields can influence customers’ consumption goals
by advertising a hedonic experience, which increases their willingness to buy—even more
expensive offers. In parallel, firms should seek to offer transparent pricing through a simple
tariff design facilitating customers to understand which service performance he or she
receives and how much they have to pay for it.
Third, tariff framing in service contexts affects customers’ tariff evaluations and
subsequent choices. Providers of traditional services can benefit from the higher “natural”
effectiveness of price fairness cues, which are mainly effective for intentional fit select
tariffs. Managers in emerging services settings can profit from the higher effectiveness of
idiosyncratic fit cues, particularly pertinent for incidental fit flat-rate, pay-per-use and
cost-cap tariffs. Providers of traditional services can benefit from the higher price fairness
and idiosyncratic fit levels associated with flat-rate and cost-cap tariffs; managers in
emerging services can profit from flat-rate and select tariffs. In contrast with pay-per-use
tariffs, customers perceive more transparent prices as cheaper leading to more favorable
price fairness and idiosyncratic fit perceptions.
Limitations and directions for further research

Beyond its contributions, this paper is subject to several limitations, pertaining to specific
boundary conditions of this research. First, scenario experiments were used and customers’
usage behavior was held constant to ensure the same billing amounts for all manipulations.
The focus was thus on the differential effects of tariff evaluation concepts on willingness to
buy. Using a similar tariff and service type manipulation, further research also could
analyze whether customers rely on the suggested idiosyncratic fit heuristic or focus on price
fairness in concrete choice situations across different industries. By allowing usage to vary,
researchers also could examine how uncertainty about usage and risk perceptions affect
customers’ perceptions of price fairness and idiosyncratic fit. Second, idiosyncratic fit
perceptions were measured. Additional research could manipulate idiosyncratic fit vs misfit
between customers’ preferences and certain tariff types, to address how idiosyncratic fit and
misfit affect tariff choice. Third, the total prices of the tariff types were identical. Further
research could examine tariff and service manipulations and the moderating role of
customer characteristics for different total prices, to determine price premiums for different
tariffs, services and customers. Fourth, the mean values of willingness to buy for some
tariffs and some services are relatively low (e.g. a pay-per-use tariff for wireless). One
explanation for this finding is that fictional tariffs and service providers were used to
control, for example, for brand reputation effects (e.g. Carlson and Weathers, 2008). While
the focus of this paper is on the drivers of the customers’ relative tariff evaluations, future
research could use choice as dependent variable to provide more direct illustrations of
customer preferences and more direct practical insights.
JOSM Notes
29,4 1. Service usage was also assessed in Study 1. Results of the moderation analysis using the data of
Study 1 are in line with those in Study 2.
2. To rule out the possibility that these effects (i.e. the relative importance idiosyncratic tariff fit as a
driver of willingness to buy) were driven by different levels of price fairness or idiosyncratic tariff
fit for different tariff and service types, two ANCOVAs with price fairness and idiosyncratic tariff
758 fit as dependent variables, tariff and service types as the independent variables, and perceived
price level and perceived pricing transparency as covariates were conducted. The results indicated
that price fairness and idiosyncratic tariff fit did not vary as a function of incidental vs intentional
tariff type (Ffairness (1, 523) ¼ 1.62, p W0.05; Ffit (1, 523) ¼ 1.78, p W0.05) or traditional vs emerging
service type (Ffairness (1, 523) ¼ 3.39, p W 0.05; Ffit (1, 523) ¼ 1.83, p W0.05).
3. In addition, ANOVAs with tariff type, service type and one of the respective moderators (using
median splits) as independent variables and the key dependent variables were analyzed. No specific
pattern of tariff preferences emerges when taking these higher-order interactions into consideration.
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JOSM Appendix 1
29,4
Item
Constructs and measurement items reliability Selected references
762 Willingness to buya Dodds et al. (1991)

I would choose the tariff at this provider 0.80/0.87
I would consider choosing the tariff at this provider 0.81/0.76
It is very likely that I would choose the tariff at this provider 0.89/0.86
Price fairnessa Bolton et al. (2010), Campbell
Overall, I think the price of the tariff is … (2007), Xia et al. (2004)
… just 0.92/0.86
… fair 0.92/0.93
… reasonable 0.87/0.88
… acceptable 0.79/0.84
Idiosyncratic tariff fita Hamilton et al. (2011), Sela
The tariff largely reflects the particular benefits of the service 0.87/0.73 et al. (2013)
for me
The tariff is a perfect fit for me compared to benefits the service 0.94/0.88
provides
The tariff best matches my needs when using the service 0.91/0.90
Given the benefits I derive from using the service, the tariff is 0.88/0.84
particularly suitable for me
Perceived price levelb Dodds et al. (1991),
Overall, the price of the tariff is … Sela et al. (2013)
… very cheap—very expensive 0.91/0.86
… very low—very high 0.88/0.70
… a bargain price—overpriced 0.81/0.76
Perceived Pricing Transparencya Homburg et al. (2014)
The provider does not try to confuse customers with the tariff 0.49/0.52
The provider enables customers to quickly calculate the right price 0.81/0.83
The provider is interested in assuring that each customer directly 0.82/0.82
knows how much he/she has to pay
The provider tries to ensure that most customers understand the 0.81/0.78
tariff
Service usage Etkin and Sela (2016),
At the present time, I consider myself to be a (infrequent/ frequent) –/0.43 Hamilton et al. (2011)
user of the servicec
Compared to my peers, I use the service (infrequently/frequently)c –/0.48
I currently use the service … –/0.45
… not at all (1)
… less than once a week (2)
… about once a week (3)
… 2 to 3 times a week (4)
… 4 to 6 times a week (5)
… about once a day (6)
… several times a day (7)
… several times per hour (8)
I intend to use the service in futurea –/0.85
In future I intend to use the service frequentlya –/0.83
Hedonic Consumption Goal a Voss et al. (2003)
Using the service is …
… fun –/0.82
Table AI. … exciting –/0.77
Study 1/Study 2: scale
items for construct
measures (continued )
Item
Customer tariff
Constructs and measurement items reliability Selected references evaluations
… delightful –/0.92
… thrilling –/0.83
… enjoyable –/0.86
Utilitarian consumption goal a Voss et al. (2003)
Using the service is … 763
… effective –/0.89
… helpful –/0.83
… functional –/0.87
… necessary –/0.60
… practical –/0.60
Expertisea Heitmann et al. (2007)
I know pretty much about these tariffs –/0.75
Among my circle of friends, I am one of the “experts” on these –/0.83
tariffs
Compared to most other people, I know more about these tariffs –/0.88
When it comes to these tariffs, I really do know a lot –/0.92
I have a lot of experiences with these tariffs –/0.86
a
Preference Confidence Heitmann et al. (2007)
I am certain that the tariff fits my preferences best –/0.90
I feel confident that the tariff matches my preferences best –/0.93
I am convinced that the tariff fulfills my needs best –/0.91
Notes: aSeven-point Likert-type rating scales with anchors at 1 ¼ “do not agree at all” and 7 ¼ “do totally
agree”; bSeven-point semantic differential scales with anchors at 1, 4, and 7; cSeven-point Likert-type rating
scales with anchors at 1 ¼ “infrequent(ly)” and 7 ¼ “frequent(ly)” Table AI.
JOSM Appendix 2
29,4
Variable 1 2 3 4 5 6 7 8 9 10
Study 1
1. Perceived price level 1.00
764 2. Perceived pricing transparency –0.31** 1.00
3. Price fairness –0.74** 0.35** 1.00
4. Idiosyncratic tariff fit –0.68** 0.45** 0.74** 1.00
5. Willingness to buy –0.60** 0.38** 0.74** 0.67** 1.00
M 4.41 4.38 4.04 3.77 3.98
SD 1.34 1.71 1.77 1.67 1.88
Composite reliability 0.95 0.92 0.97 0.97 0.94
Cronbach’s α 0.95 0.91 0.97 0.97 0.94
Average variance extracted 0.87 0.74 0.88 0.90 0.83
Study 2
1. Perceived price level 1.00
2. Perceived pricing transparency –0.33** 1.00
3. Price fairness –0.55** 0.48** 1.00
4. Idiosyncratic tariff fit –0.43** 0.47** 0.79** 1.00
5. Willingness to buy –0.36** 0.41** 0.68** 0.79** 1.00
6. Service usage 0.08 0.04 0.14** 0.26** 0.30** 1.00
7. Hedonic consumption goal –0.04 0.16** 0.21** 0.36** 0.36** 0.74** 1.00
8. Utilitarian consumption goal 0.01 0.14** 0.15** 0.33** 0.31** 0.75** 0.77** 1.00
9. Expertise 0.10* 0.10* 0.00 0.12** 0.15** 0.65** 0.60** 0.53** 1.00
10. Preference confidence –0.36** 0.44** 0.63** 0.79** 0.72** 0.29** 0.37** 0.32** 0.19** 1.00
M 4.28 4.45 4.18 3.93 3.68 3.28 3.62 3.86 2.79 3.58
SD 1.11 1.46 1.58 1.66 1.76 1.64 1.72 1.65 1.67 1.74
Composite reliability 0.91 0.92 0.97 0.95 0.94 0.88 0.96 0.94 0.97 0.97
Table AII. Cronbach’s α 0.91 0.91 0.97 0.95 0.93 0.89 0.96 0.94 0.96 0.97
Descriptive statistics Average variance extracted 0.77 0.74 0.88 0.84 0.83 0.61 0.84 0.76 0.85 0.91
and correlation matrix Notes: *p o0.05; **p o0.01
Corresponding author
Dirk Totzek can be contacted at: dirk.totzek@uni-passau.de
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How Price Fairness and Fit Affect Customer Tariff Evaluations

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How price fairness and fit affect Customer tariff

Research Void: Interplay of Price Fairness and

Research Gaps: Research Gaps:

Price Fairness Idiosyncratic Fit Heuristic

Price Comparison Price Comparison

Pricing and Promotion Tactics Pricing and Promotion Tactics

Framing Tactics Framing Tactics

Conceptual background and hypotheses

Price fairness-related mechanisms in tariff evaluation and choice

Idiosyncratic tariff fit-related mechanisms in tariff evaluation and choice

– H4a–H4d: Service Usage – H7a–H7b: Expertise

– H5a–H5d: Hedonic Consumption Goal – H8a–H8b: Preference Confidence

Perceived Pricing H2 + Idiosyncratic

Moderation mechanisms for perceived price level and pricing transparency

Moderation mechanisms for price fairness and idiosyncratic tariff fit

The moderating role of tariff type and service type

Study 1: basic effects of price fairness and idiosyncratic fit

Service Type Traditional Emerging

Measure development and assessment

Criterion Characteristics Study 1 Study 2

Sample size N 292 528

Results and discussion

Determinants Tariff Evaluation Outcome

Perceived Price #11 = –0.76**/–0.54** Price Fairness

Study 2: customer and context characteristics as moderating mechanisms

Study 1 and Study 2

Measure development and assessment

Results and discussion

Perceived price level → Price fairness

Service usage H4b –0.51** 0.41** 0.19** |

Idiosyncratic Tariff Fit

Low Service Usage High Service Usage

C: Perceived Pricing Transparency × Service D: Perceived Pricing Transparency × Service

Idiosyncratic Tariff Fit

Low HED High HED Low UT High UT

Idiosyncratic Tariff Fit

Low HED High HED Low UT High UT

Low Expertise High Expertise

C: Price Fairness × Preference D: Idiosyncratic Tariff Fit × Preference

cost-cap) tariffs, g ¼ 2 for intentional fit (i.e. select)

Limitations and directions for further research

762 Willingness to buya Dodds et al. (1991)

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Perceived Price #11 = –0.76/–0.54 Price Fairness

Service usage H4b –0.51 0.41 0.19** |