Does effective cost transparency increase price fairness? An analysis of apparel brand strategies

Built on reference dependence, this study investigated how the framing of cost information affects perceived gains and losses, and tested the mediating roles of gain and loss perceptions in the relationship between cost information and price fairness, which in turn, increase buying intentions toward the apparel brand. A between-subjects study was designed to test the hypotheses and our sample consisted of a total of 804 U.S. participants who responded to our online survey. The results showed that disclosing the true cost and markup of a product along with its retail price was a more effective way to increase the perceived gain of buying and also the loss of not buying the product than when only the retail price was presented. Differently framed cost information triggered price fairness and buying intentions only through gain perceptions, but not through loss perceptions. The results of this research demonstrate the power of cost transparency using reference points for effective apparel brand strategies. Theoretical and practical implications were also discussed.