The Framing Effects of Multipart Pricing on Consumer Purchasing Behavior of Customized Information Good Bundles

Applying behavioral economic theories, we hypothesize that consumers have sticky reference prices for individual information goods, but their perceived value for customizable bundle offers can be significantly influenced by the framing of a multipart pricing scheme. The potential impacts of these fr...

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Bibliographic Details
Published in:Information systems research 2013-06, Vol.24 (2), p.334-351
Main Authors: Goh, Kim Huat, Bockstedt, Jesse C.
Format: Article
Language:English
Subjects:
Behavioral economics
behavioral experiments
Bundling
Consumer behavior
Consumer prices
Consumer research
Consumers
Costs
Customization
Design
Econometrics
Economic theory
Experiments
Framing effects
Hypotheses
Information goods
Marketing
Methods
multipart pricing
natural experiments
P values
Perceptions
Population size
Prices
Pricing
Pricing policies
Purchasing
Sales
Studies
Tariffs
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Summary:Applying behavioral economic theories, we hypothesize that consumers have sticky reference prices for individual information goods, but their perceived value for customizable bundle offers can be significantly influenced by the framing of a multipart pricing scheme. The potential impacts of these framing effects are measurable changes in consumer behavior and sales outcomes. We conducted a series of behavioral experiments and a large-scale natural field experiment involving actual purchases of customized information good bundles to confirm and analyze the hypothesized effects. The results demonstrate a consumer's willingness to purchase a customized bundle of information goods, the size of the resulting bundling, and the consumer's perceptions of the transaction are each significantly influenced by the design of the multipart pricing scheme. These results hold even when the final price and size of a customized bundle are the same across differing schemes. We discuss the potential tradeoffs in economic outcomes that result from price framing (e.g., likelihood of sale versus size of purchased bundles) and the implications for information good retailers.
ISSN:1047-7047
1526-5536
DOI:10.1287/isre.1120.0428