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

Abstract

In the past two decades, pricing research has paid increasing attention to instances where a product's price is divided into a base price and one or more mandatory surcharges, a practice termed partitioned pricing. Recently, partitioned pricing strategies in the marketplace have become more pervasive and complex, raising concerns that consumers do not always fully attend to or process all price information, and underestimate total prices, which in turn influences their purchasing behavior. Thus, understanding how partitioned prices affect consumers is of increasing interest to consumer researchers, public policy makers, and marketing managers. This paper reviews and organizes the academic literature on partitioned pricing and proposes an agenda for future research. We focus on the psychological processes underlying partitioned pricing, to help these three constituencies understand how partitioned pricing works, the mechanisms by which it exerts its impact, and the appropriate areas where the practice may need regulation to protect consumers.

Keywords: partitioned pricing, fees, surcharges, taxes, shipping and handling

JEL Classification: C91, C93, D18, D40, D44, D60, D83, E21, H20, K41, M31, M37