Psychological pricing vs. being fair?

1. Is psychological pricing ethical?
2. Why is psychological pricing better than competitive pricing?
3. What is fairness effect in pricing?

Is psychological pricing ethical?

The bottom line is that if you don't have appealing offers from the start, using psychology will at best be a minor benefit, and at worse be an unethical way to goad customers into taking offers they won't like. This is not a sustainable way to do business, as the backlash will stack up.

Why is psychological pricing better than competitive pricing?

If a competitor launches a new product that is cheaper, by implementing psychological pricing a business can quickly tweak prices to ensure consumers believe they're still getting the best deal with its products.

What is fairness effect in pricing?

Particularly in a buyers' market like the United States, a “fair” price is one which is in the buyers' favor (Kalapurakal et al., 1991). Hence, a price lower than the reference price is still considered by the buyer to be “fair”, but a price higher than the reference price is considered “unfair”.