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.