Communal Attributions Drive Perceptions of Price Fairness When Recouping Green Manufacturing Costs

Abstract

This research investigates the perceived fairness of price increases that are due to green manufacturing practices. We show that consumers view price increases due to green manufacturing costs as fairer than price increases due to manufacturing costs of equivalent magnitude that are not related to sustainable manufacturing, both in the case of alignable/direct costs and nonalignable/indirect costs (studies 1A-1B). Green costs boost price fairness perceptions because willful investment in green manufacturing signals that a company is concerned with the welfare of others, a marker of a communal orientation (study 2). The boost in fairness perceptions is eliminated when communal attributions are undermined: if a firm reveals self-interest (study 3), or is exogenously forced to adopt greener practices (study 4), then sustainable manufacturing is no longer viewed as a fair reason to increase prices. The boost in fairness perceptions has positive consequences on behavior (study 5). These findings have implications for firms considering investing in green manufacturing, and for policy-makers assessing how to incentivize companies to curb the environmental impact of production facilities.