WORLD ECOSYSTEMS

World Ecosystems

World Ecosystems

Introduction

The ethical issues in pricing are similar to those governing other aspects of business and deal primarily with fairness—fair competition and fair treatment of buyers and sellers. Generally, any pricing practice that maintains the competitive nature of the market and is fair to market players is ethical practices that hamper free competition or unfairly treat specific constituencies of buyers or sellers are likely to be unethical.

Discussion

Perhaps no area of managerial activity is more difficult to assess fairly and to prescribe normatively in terms of morality than the area of pricing. The given price of a product or service commonly results from the confluence of three factors: demand, competition, and cost (Wilber, 2007). Each of these factors can be central to ethical questions about pricing fairness. For example, when high demand puts pressure on supply, such as the desperate need for construction materials after a natural disaster, there may be a temptation for sellers to price-gouge (Mascarenhas, 2005). Or in an attempt to gain dominant market share, strong competitors may use predatory pricing (below cost pricing) to drive economically challenged sellers from the marketplace. In a businessto-business setting, a vendor may simply mislead a client concerning what “actual costs” have been incurred especially if they are operating under a “cost plus” pricing contract. While there is agreement that sellers are entitled to some profit margin above their full cost, how high prices can be and still be “fair” has been debated since medieval times (Harrison, 2008). According to theologians such as Thomas Aquinas, the “just price” was often conceived of as the (debatable) amount above cost that the merchant needed to charge in order to maintain his or her business and to provide for his or her family. Charging more than that was to commit the grievous sin of avarice (Hahn, 2007).

There is presently considerable regulation that helps establish some minimum behaviors for “fair pricing” (e.g., price-fixing by sellers, sometimes called “collusion,” is illegal; similarly, “price discrimination” to different distributors by sellers without economic justification is also contrary to commercial law). Nevertheless, the concept of ethical pricing seems destined for considerable future debate. One current practice in the news has to do with the pricing strategy engaged in by the so-called pay day loan stores (i.e., those lending businesses that provide instant cash advances in lieu of unpaid, but earned, wages) (Davidson, 2006).

Of course, the extent of practitioner compliance with these values is another issue. Over the years, surveys of marketing managers report that the vast majority of practitioners discharge their job responsibilities in a lawful and meritorious manner (Wilber, 2007). Nonetheless, every year brings its share of horrific and controversial marketing blunders. Current issues in the news involving marketing practices have to do with price-gouging when gasoline shortages occur (as they did in the wake of Hurricane Katrina) and stealth marketing techniques such as surreptitiously gathering information about consumer patterns when they surf shopping sites on the ...