The Effects Of Price Partitioning And Its Implications For Menu Pricing
This dissertation comprises three essays under the umbrella of behavioral research on price partitioning. The first essay examined consumers' responses to financially equivalent prix fixe menu prices with a built-in gratuity, a separately listed percentage gratuity or a separately listed dollar gratuity at surcharge levels different from the 15% tipping benchmark. I demonstrated that surcharge level moderated the relationship between menu price presentation and consumers' deal perception and this moderating effect can be explained by the evaluability of the individual price components within a partitioned price. The second essay further explored surcharge framing by studying the differential effects of voluntary versus mandatory service gratuity on consumers' menu price perception and demand. Findings from three experiments indicated that a Sunday brunch price with 15% customary tipping led to a lower perceived expensiveness and higher patronage intent than the same price with a 15% mandatory service gratuity. More importantly, through process measure analyses and mediation tests, the studies provided converging evidence that participants' use of surcharge and perceived surcharge fairness acted in parallel and with similar strengths as mediators of the relationship between surcharge policy and menu price perception. I also found that participant's patronage intent was mediated by both surcharge fairness perception and price expensiveness perception, although the impact of the former mediator was significantly stronger. As an extension of my empirical work using a multi-process approach to studying price partitioning effects, the third dissertation essay described an integrative framework on the psychological mechanisms for processing partitioned prices. Based on a review and synthesis of extant research, I identified seven processing routes and suggested that an individual will take a particular route to process a partitioned price depending on five key characteristics of its secondary price component. This integrative model can adequately yet parsimoniously differentiate among the various psychological mechanisms underlying the price partitioning effects and potentially resolve some inconsistent findings in the literature.
Price Partitioning; Price Framing; Service Gratuity
Lynn, William Michael
Verma, Rohit; Stayman, Douglas M.
Ph.D. of Hotel Administration
Doctor of Philosophy
dissertation or thesis