Fairness judgments and counterfactual thinking: pricing goods versus services

Purpose – This paper aims to propose and empirically document the idea that people’s perceptions of having been treated fairly depend, in part, on whether the explanation provided to them of a product’s pricing is primarily based on the costs of labor (a service) versus materials (goods). Because materials are more fixed and tangible than the effort of labor, it is argued that people will have fewer counterfactual thoughts about how things could have been different with the cost of materials than those associated with labor. This has implications for fairness judgments more generally, as it suggests that people may be uneven in which types of data they attend to when making fairness judgments. Three experiments are presented that empirically test the relationship between the salience of goods versus services in the price paid and the resulting perceptions of fairness. Findings confirm that thoughts of money spent on a service were associated with lesser feelings of fairness than were thoughts of money spent on a good. This research uniquely identifies the mechanism by which some evaluations are considered fairer than others. Implications for organizational processes, such as procedural justice and fair compensation, are discussed. Design/methodology/approach – Three experiments are presented that empirically test the relationship between the salience of goods versus services in the price paid, and the resulting perceptions of fairness. Findings – Findings confirm that thoughts of money spent on a service were associated with lesser feelings of fairness than were thoughts of money spent on a good. Originality/value – This research uniquely identifies the mechanism by which some evaluations are considered fairer than others. Implications for organizational processes, such as procedural justice and fair compensation, are discussed.