DIVIDE AND PROSPER - CONSUMERS REACTIONS TO PARTITIONED PRICES

Many firms divide a product's price into two mandatory parts, such as the base price of a mail-order shirt and the surcharge for shipping an d handling, rather than charging a combined, all-inclusive price, The authors call this strategy partitioned pricing. Although firms presuma bly use partitioned pricing to increase demand and profits, there is l ittle clear empirical support that these prices increase demand or any theoretical explanation for why this should occur. The authors test h ypotheses of how consumers process partitioned prices and how partitio ned pricing affects consumers' processing and recall of total costs an d their purchase intentions and certain types of demand. The results s uggest that partitioned prices decrease consumers' recalled total cost s and increase their demand. The manner in which the surcharge is pres ented and consumers' affect for the brand name also influence how they react to partitioned prices.