Partitioning or Bundling? Perceived Fairness of the Surcharge Makes a Difference

Abstract

Partitioned pricing charges a base price and a surcharge instead of an equivalent all-inclusive price. In contrast, a bundling strategy offers a bundled price instead of separate prices for products in one package. Which pricing practice is more profitable? Previous research has shown conflicting results. This research identifies the boundary conditions which circumscribe the profitability of partitioned and bundled pricing. Results of three experiments indicate that the relative significance of the surcharge to the base price influences consumers\u27 perception of the fairness of the surcharge, which in turn influences consumer purchase intentions. Furthermore, given the same level of surcharge, consumers\u27 perceptions of the fairness of the surcharge moderates the effect of the pricing strategies. Thus, perceived fairness of the surcharge appears to be the key in determining whether or not the partitioning strategy is more profitable than the bundling strategy