Seeing Like a Company or a Customer: Selective Empathy in Pricing

Abstract

Sociologists have long shown that moral beliefs are key to sustaining market arrangements. Yet surprisingly little research has examined how groups may assess the fairness of taken-for-granted market practices differently. In this article, we draw on three survey studies to examine Americans’ moral beliefs about risk-based pricing, a pricing institution in which consumers who are predicted to be costly are charged more. In markets for both insurance and consumer loans, we uncover a pattern in which higher-income individuals are consistently more likely than lower-income individuals to accept the moral legitimacy of tethering prices to a person’s behavior, irrespective of economic self-interest or ideology. To explain this pattern, we introduce a novel theoretical lens we term “selective empathy”—that is, in evaluating pricing arrangements, individuals disproportionately direct their empathy to one exchange partner or the other, taking the perspective of either the company or the customer. We find that wealthier individuals are more likely than lower-income individuals to empathize with companies—and less likely to empathize with high-risk consumers. These findings cast risk-based pricing as a classed form of economic rationality. Moreover, they bring attention to the role of affect in pro-capital attitudes.