When paying $92 plus $5 shipping is acceptable but paying $97 is not: The Role of Justification on the Effectiveness of Partitioned Pricing

Partitioned pricing that consists of a base price and mandatory surcharges has become a widely used pricing strategy as online transactions become more widespread and different types of surcharges are developed (Morwitz, Greenleaf, Shalev, and Johnson 2009). Consumers are likely to perceive the total cost to be lower when a price is partitioned than combined because they tend to underestimate surcharges (Morwitz, Greenleaf, and Johnsoni998, Clark and Ward 2008). The rationale for the favorable effect of partitioned pricing is based on the theory of anchoring and adjustment (Tversky and Kahneman 1974); people anchor on a base price to establish price perception and do not pay enough attention to surcharges to sufficiently adjust for them (Morwitz et al 1998).