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How Does Partitioning Prices Influence Consumer Responses?

In: New Directions in Behavioral Pricing

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  • Ajay T. Abraham
  • Rebecca W. Hamilton

Abstract

Consumers often encounter mandatory surcharges and fees (e.g., taxes, shipping for online purchases). For example, when purchasing a book online, the consumer may pay one price to purchase the book and another price to ship it. This chapter uses the framework of partitioned pricing (Morwitz et al. 1998) to analyze the effect of such mandatory surcharges on consumer responses by identifying three mechanisms — encoding, attentional, and appraisal — by which the effects of partitioned pricing versus all-inclusive pricing influence consumer responses. The chapter reports a meta-analysis of the existing academic literature in this domain to investigate the relative strength of these three mechanisms. The findings of this meta-analysis indicate the strongest evidence for the appraisal mechanism, followed by the encoding mechanism, and then the attentional mechanism. The chapter concludes by highlighting insights based on the meta-analysis and fruitful avenues for future research in this domain…

Suggested Citation

  • Ajay T. Abraham & Rebecca W. Hamilton, 2024. "How Does Partitioning Prices Influence Consumer Responses?," World Scientific Book Chapters, in: Chezy Ofir (ed.), New Directions in Behavioral Pricing, chapter 6, pages 143-166, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811292231_0006
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    Keywords

    New Currencies; Loyalty Program Miles as a Virtual Currency; Uncertainty in Value; Choice of Payment Mode; Loyalty Program Management; Affective Price Evaluations; Pain of Paying ; Metacognitive Experience In Price Evaluation; The Ease-of-Recall Pricing Effect; The Ease-of-Computation Effect; Hedonic Price Evaluations; Price Fairness; Dual Entitlement; Communicating Price Changes; Communicating Price Differences; Internal Reference Price; Gain–Loss Asymmetry; Price Thresholds; Processing Price Information; Framing Price Changes; Framing Price Differences; Buyers' Purchase Goals; Round Versus Sharp (Odd) Prices; Price Promotion Information Processing; Ease of Computing Price Differences; Size of Right Digit Endings; Absolute Versus Relative Price Differences; Communicating Price Differences; Effects on Quality Inferences And Internal Reference Prices; Post-Promotion Price Expectations; Perceived Fairness of Price Promotions; Pay-What-You-Want (PWYW); Social Preferences; Models of Finitely Repeated Games with Incomplete Information; Signaling; Self-Signaling; Social Signaling; Social Preferences; Partitioned Pricing; Bargains; Efficiency Frontier;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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