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Price Salience and Product Choice

Author

Listed:
  • Tom Blake

    (eBay Research, San Jose, California 95125)

  • Sarah Moshary

    (University of Chicago Booth School of Business, Chicago, Illinois 60637)

  • Kane Sweeney

    (Instacart, San Francisco, California 94105)

  • Steve Tadelis

    (University of California Berkeley, Berkeley, California 94720; National Bureau of Economic Research, Cambridge, Massachusetts 02138; Center for Economic and Policy Research, Washington, District of Columbia 20009)

Abstract

Online vendors often employ drip-pricing strategies, where mandatory fees are displayed at a later stage in the purchase process than base prices. We analyze a large-scale field experiment on StubHub.com and show that disclosing fees upfront reduces both the quantity and quality of purchases. The effect of salience on quality accounts for at least 28% of the overall revenue decline. Detailed click-stream data show that price shrouding makes price comparisons difficult and results in consumers spending more than they would otherwise. We also find that sellers respond to increased price obfuscation by listing higher-quality tickets.

Suggested Citation

  • Tom Blake & Sarah Moshary & Kane Sweeney & Steve Tadelis, 2021. "Price Salience and Product Choice," Marketing Science, INFORMS, vol. 40(4), pages 619-636, July.
    • Handle: RePEc:inm:ormksc:v:40:y:2021:i:4:p:619-636
    DOI: 10.1287/mksc.2020.1261
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    References listed on IDEAS

    as
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    Cited by:

    1. Luo, Sha & Fang, Shu-Cherng & Zhang, Jiahua & King, Russell E., 2023. "Price competition and cost efficiency facing buyer’s bounded rationality," International Journal of Production Economics, Elsevier, vol. 266(C).
    2. Bibler, Andrew & Grigolon, Laura & Teltser, Keith & Tremblay, Mark, 2024. "Identifying Tax Compliance from Changes in Enforcement: Theory and Empirics," CEPR Discussion Papers 18805, C.E.P.R. Discussion Papers.

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