For most people, a fair price is a price others pay for a good or service. At the same time, most people also consider giving a lower price to certain groups—such as seniors, students, or low-wage earners—to be fair. How can these two perceptions of a fair price coexist in the same society?

Welcome to the paradox of fair prices.

When the Bruce Henderson Institute (BHI) surveyed more than 13,000 people in eight countries, it learned that people have a healthy tolerance for what economists call price discrimination—selling the same product or service to different buyers at different prices—as long as companies can justify it. The challenge for business leaders who want to vary prices fairly is that individuals’ perceptions of what is fair are numerous, nuanced, and often contradictory. Whether individuals perceive a price to be fair will depend on the product or service category, their age, where they live, what they earn, their political beliefs, and who the customer is (themselves or someone else).

Business leaders know that price variation can be more economically advantageous than using a one-size-fits-all model; the former allows companies to serve more customer segments and earn higher margins. Yet few leaders have considered that price variation can be fairer than uniform pricing.