Original title: Digital Price Disclosure and Sustainable Service Operations: When Should Firms Offer Drip Pricing?
Drip pricingA pricing method that advertises a low price first and reveals additional fees later in the purchase process. shows a low starting price, then reveals extra fees later. The paper asks whether a service firm should offer it alongside a price that includes everything. Its model accounts for customers who dislike feeling misled and customers who face costs when switching options. It finds that extra fees can change both the firm’s profits and what customers gain, so the firm does not always benefit.
Imagine choosing a meal from a menu that lists a low price, then adds charges as you order. It is hard to know whether the deal is worthwhile when the final cost appears late, and changing to another meal may take effort. In this paper, the meal choices are the firm’s pricing options: the late charges are drip pricing, and the effort to change choices helps determine whether the firm and its customers benefit.
People may see a low price online, then discover extra fees later. The paper shows that whether this strategy helps a firm depends partly on how customers react to those fees and whether they switch between the firm’s own pricing options. Those choices can also change what consumers pay and whether they benefit.
The abstract describes a model and its extensions, but does not report empirical testing with real firms or consumers. It does not give numerical estimates of how common drip pricing is, how large its effects are, or which specific conditions make both firms and consumers better off.
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Digital Price Disclosure and Sustainable Service Operations: When Should Firms Offer Drip Pricing? — Wei Na Zheng, Jing Lin, Shuxia Peng et al. — Sustainability — doi:10.3390/su181910186
Abstract licence: CC BY
Explanation generated by Synthesis from the abstract — it is not the original paper.