"Refunds" or "Discounts"? Exploring the Compensation Framing Effect on Consumer's Perceived Fairness of Online Service Recovery

This paper studied the different impacts of two compensation frames, “giving refunds” and “offering discounts”, on consumer’s perceived fairness in the recovery of online pricing error. We found that people perceived more fairness from a negative frame “offering discounts” than from a positive frame “giving refunds” in general. Then we introduced the regulatory fit theory to elucidate the compensation framing effect and checked the moderating effect of regulatory focus, the results showed that there was a fit between compensation frames and regulatory focus, “giving refunds” was promotion-focused and “offering discounts” was prevention-focused. “Giving refunds” was perceived as more fair than “offering discounts” for participants with a promotion focus while “offering discounts” was perceived as more fair than “giving refunds” for participants with a prevention focus. We also checked the moderating effect of compensation depth, consumers perceived the negative frame “offering discounts” (the positive frame “giving refunds”) as more (less) fair than the positive frame “giving refunds” (the negative frame “offering discounts”) under high-depth compensation condition; but under low-depth compensation,the result was not salient.