Consumer Estimates of Online Quantity Surcharge Incidence Rates

Abstract

Quantity surcharges represent situations in which consumers are charged unit prices for buying large packages of a product that exceed the unit prices for smaller packages. This practice challenges the commonly held assumption that discounts rather than surcharges should be associated with larger purchase quantities. While past research has established the prevalence of this pricing practice, the degree by which consumers believe quantity surcharged to be present in the marketplace has not been empirically examined. In this study, consumer estimates of the incidence rate of quantity surcharges in online shopping environments are examined through a national survey of 522 American consumers. The effects of cognitive and demographic factors on consumers' estimates for the incidence rate of quantity surcharges are empirically examined. The findings reveal significant underestimation by consumers of the prevalence of this deceptive pricing practice. Furthermore, consumer estimates are found to be affected by cognitive style, gender, income, and prior exposure to quantity surcharges.