A Multi-Method Examination of Partitioned Pricing

Abstract

This dissertation investigates the relationship between partitioned pricing (Morwitz, Greenleaf, and Johnson 1998) and dependent variables such as demand, preference, and attention.

The first essay proposes a theoretical framework to examine extant and new moderators of partitioned pricing, classifying moderators based on the source of their impact as presentational, evaluative, or attentional. A meta-analysis of 17 years of research on partitioned pricing examines 149 observations from 43 studies in 27 papers (N = 12,878). The perceived benefit of the surcharge and the typicality of partitioning the surcharge in the category emerge as robust moderators of the effect of partitioned pricing on consumer demand. Surcharges for components perceived to provide high benefit and highly typical surcharges make partitioned prices more attractive. Replicating the meta-analytic effects of typicality, a follow-up experiment shows a more positive effect of partitioning on preference for typical surcharges than for atypical surcharges, and an eye-tracking experiment offers insight into the underlying mechanism by showing that people pay more attention to atypical surcharges than to typical surcharges.

Different pricing strategies in the same market suggest different beliefs about the efficacy of partitioning prices on consumers' preferences. The second essay in this dissertation explores the impact of two countervailing theoretical influences that may predict how the numerical magnitude of surcharges can affect preferences. "Base price anchoring" suggests that as the magnitude of the surcharge increases (holding the total price constant), consumers may anchor on a lower base price, leading them to evaluate partitioned prices more favorably. In contrast, "surcharge salience" suggests that as the magnitude of the surcharge increases, attention to the surcharge increases, and evaluations of partitioned prices decrease. An analysis of eBay auction data reveals support for the influence of base price anchoring, and a follow-up experiment suggests that this mechanism dominates at lower levels of surcharge magnitude whereas surcharge salience dominates at higher levels of surcharge magnitude. Finally, an eye-tracking study demonstrates the influence of surcharge salience on preference and attention.