The Price Does Not Include Additional Taxes, Fees, and Surcharges: A Review of Research on Partitioned Pricing

Experimental Evidence of Tax Salience and the Labor-Leisure Decision: Anchoring, Tax Aversion, or Complexity?

“…However, in Experiment 2, we find evidence of lower work rates for both income and excise tax offer types and for the tax credit offer types, but we cannot reject the null hypothesis for the bonus condition, although the estimated effect is negative. 21 As discussed in the Introduction, the marketing literature has already identified some of the ways that partitioned pricing effects can be affected by apparently innocuous factors, such as whether surcharges are expressed in terms of dollars or percentages of the base price (Morwitz et al 1998) or the size of the surcharge (Morwitz et al 2009). Rather than chance variation, it is possible that differences in the experimental designs made the bonus condition especially disfavored in Experiment 1 or less disfavored in Experiment 2.…”

“…In particular, it remains unsettled whether price framing effects result from cognitive limitations that prevent consumers from fully incorporating surcharges into their calculations of purchase prices (Morwitz et al 1998). Under this view, it is often suggested that consumers use a decision heuristic, such as anchoring on the base price and insufficiently adjusting their calculation of the total purchase cost by the amount of the surcharges (Morwitz et al 2009). If partitioned pricing effects result from cognitive limitations, then showing consumers the all-inclusive purchase price alongside the partitioned price would be expected to eliminate the effects of partitioned pricing.…”

Failing to Choose the Best Price: Theory, Evidence, and Policy

“…Note that these terms are often used more broadly by other researchers. For instance, Morwitz, Greenleaf, Shalev and Johnson (2013) include drip pricing as a special case of partition pricing and Shelanski, Farrell, Hanner, Metcalf, Sullivan and Wendling (2012) include add-on pricing as a type of drip pricing.…”

“…I try to focus on examples where poor choices cannot be reasonably attributed to unawareness of better options or subtle quality differences. For additional evidence of price confusion stemming from the effects of partitioned or drip pricing practices, see Morwitz et al (2013).…”

Multipart tariffs and bounded rationality: An experimental analysis of mobile phone plan choices

“…These negative effects of complexity can persist even in simulated market environments (Kalayci and Potters, 2011;Sitzia and Zizzo, 2011). Others have studied how different kinds of pricing complexity and obfuscation such as price partitioning (Morwitz et al, 1998(Morwitz et al, , 2013 and shrouding (Brown et al, 2010;Chetty et al, 2009) affect decision quality. None of these papers study multipart tariffs.…”