Dual-process model for the influence of taxes and fees inclusion on price perceptions

Abstract

Purpose This research aims to study whether consumers differ in their attitudes toward equivalent prices that include vs exclude taxes and fees. In addition, this research will study whether computation ease-based processing fluency and perceived price fairness mediate this relationship in parallel, and whether need for cognition and political beliefs and affiliation moderate the effect. Design/methodology/approach Two experiments were conducted in which participants evaluated two price formats and then responded to relevant measures. Findings This research shows that consumers perceive prices that include (vs exclude) taxes and fees to be easier to process, and a fairer price, and subsequently exhibit a higher willingness to buy. Additionally, this effect is moderated by need for cognition, and political beliefs and affiliation. Research limitations/implications Future research could investigate potential additional situational moderators (such as price type – total vs unit, consumption category, relative sizes of base price vs taxes and fees) and dispositional moderators (such as price sensitivity and tightwadism/spendthriftism). Practical implications This research provides insights to marketers regarding the downstream impact of pricing decisions – such as including vs excluding taxes and fees from total price. Further, depending on the product category and target customer characteristics (political affiliation), marketers can determine whether to include or exclude taxes and fees. Social implications This research highlights the tendency of conservatives to avoid taxes and fees. As such, it adds to the understanding of conservative consumer groups. Originality/value This research contributes to existing research on price-framing research by finding an interesting effect related to multi-dimensional pricing and partitioned pricing. Additionally, this research contributes to existing research on computation ease-based processing fluency and price fairness perception. Finally, this contributes to an increasingly important body of research: the effect of political affiliation on consumption. This also provides clear guidance to marketers with regard to deciding service pricing.