The framing effect of price format
By: Marco Bertini and Luc Wathieu
Contributors: Wathieu, Luc; Harvard Business School. Division of Research
Series: Working paper / Division of Research, Harvard Business School -- 06-055; Working paper (Harvard Business School. Division of Research) -- 06-055
Publisher: Division of Research, Harvard Business School
Published: 2006
Place of publication: Boston]
Language: eng
Number of pages: 24
Description: Existing evidence suggests that preferences are affected by whether a price is presented as one all-inclusive expense or partitioned into a series of charges. To explain this phenomenon, we propose a simple psychological mechanism whereby price format determines how many product attributes are actively processed at the time of valuation. Three studies support the hypothesis that price partitioning acts as an incentive to process multiple product dimensions. This process sometimes leads to the paradoxical overweighting of minor (but easy to evaluate) attributes that would be overlooked under an all-inclusive price format. The effect of price partitioning on demand can be detrimental or beneficial, consistent with existing conflicting findings in the literature and with variance in practice. Beyond its predictive and prescriptive implications, this theory contributes to the general notion that pricing might affect as much as capture perceived value.
Notes: "May 16, 2006"--[P. 1].

Includes bibliographical references.