The Effects of Service Charges versus Service-included Pricing on Deal Perception
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Study participants rated menu prices with an automatic percentage service gratuity as better deals than equivalent service-included prices when the service component of price was below the standard 15 percent tipping rate. However, the reverse was true when the service component of price was above 15 percent. Furthermore, a move from percentage service gratuity toward dollar service gratuity impeded participants’ menu price judgment. These findings provide some insights regarding which pricing alternative to tipping should be implemented if and when restaurateurs decide to abandon voluntary tipping.
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service charge; automatic service gratuity; service-included pricing; price partitioning; price evaluability; surcharge framing
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Required Publisher Statement: © SAGE. Final version published as: Wang, S., & Lynn, M. (2017). The effects of service charges versus service-included pricing on deal perception. Journal of Hospitality & Tourism Research, 41(2), 246-254. doi:10.1177/1096348014525636 Reprinted with permission. All rights reserved.