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To divide or not to divide? The impact of partitioned pricing on the informational and sacrifice effects of price

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  • Franziska Völckner
  • Alexander Rühle
  • Martin Spann

Abstract

Firms often partition a product’s price into two mandatory parts (e.g., the base price of a mail-order DVD and the surcharge for shipping and handling) instead of charging one all-inclusive price. This study examines whether and to what extent partitioned pricing (compared to one all-inclusive price) influences the informational and sacrifice effects of price. We empirically show that partitioned pricing oppositely affects these two distinct roles of price: the informational effect of price (i.e., price as an indicator of quality) increases, while the sacrifice effect (i.e., price as a measure of sacrifice) becomes more negative. In product categories with substantial price–quality inferences, the positive impact of partitioned pricing on the informational effect can overcompensate for its negative impact on the sacrifice effect, making partitioned prices the preferable strategy. Copyright Springer Science+Business Media, LLC 2012

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  • Franziska Völckner & Alexander Rühle & Martin Spann, 2012. "To divide or not to divide? The impact of partitioned pricing on the informational and sacrifice effects of price," Marketing Letters, Springer, vol. 23(3), pages 719-730, September.
    • Handle: RePEc:kap:mktlet:v:23:y:2012:i:3:p:719-730
    DOI: 10.1007/s11002-012-9174-5
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    2. Katja Seim & Maria Ana Vitorino & David M. Muir, 2017. "Do consumers value price transparency?," Quantitative Marketing and Economics (QME), Springer, vol. 15(4), pages 305-339, December.
    3. Schnittka, Oliver, 2015. "Are they always promising? An empirical analysis of moderators influencing consumer preferences for economy and premium private labels," Journal of Retailing and Consumer Services, Elsevier, vol. 24(C), pages 94-99.
    4. Sahay, Arvind & Mukherjee, Sumitava, 2014. "Weighted-Additive versus Reference-Dependent models of bundle evaluation: Evidence from discount framing on product bundles with surcharges," IIMA Working Papers WP2014-03-12, Indian Institute of Management Ahmedabad, Research and Publication Department.
    5. Richard C. Bishop & Kevin J. Boyle, 2021. "On Adding-Up as a Validity Criterion for Stated-Preference Studies," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(3), pages 587-601, November.
    6. Ferguson, Jodie L. & Brown, Brian P. & Johnston, Wesley J., 2017. "Partitioned pricing, price fairness perceptions, and the moderating effects of brand relationships in SME business markets," Journal of Business Research, Elsevier, vol. 72(C), pages 80-92.
    7. Choi, Jungsil & Madhavaram, Sreedhar R. & Park, Hyun Young, 2020. "The Role of Hedonic and Utilitarian Motives on the Effectiveness of Partitioned Pricing," Journal of Retailing, Elsevier, vol. 96(2), pages 251-265.
    8. Ernst Fehr & Keyu Wu, 2021. "Obfuscation in competitive markets," ECON - Working Papers 391, Department of Economics - University of Zurich, revised Feb 2023.
    9. Nicole Koschate-Fischer & Katharina Wüllner, 2017. "New developments in behavioral pricing research," Journal of Business Economics, Springer, vol. 87(6), pages 809-875, August.
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    12. Johannes Voester & Bjoern Ivens & Alexander Leischnig, 2017. "Partitioned pricing: review of the literature and directions for further research," Review of Managerial Science, Springer, vol. 11(4), pages 879-931, October.

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