When Shrouding the Total Price Signals Transparency: A Preference for Costly Disclosures

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Abstract

We identify a consumer preference for information disclosure that is costly. We examine the impact of partitioned pricing (i.e., separating charges into multiple line items) without totals. Across a variety of products, rather than finding that consumers only prefer partitioning when they can accurately identify the total price, we find that many consumers prefer partitioned (to consolidated) price disclosures even in cases when consumers are more likely to choose financially dominated options (higher priced but not higher quality) when presented with partitioned (vs. consolidated) price disclosures. This effect is driven by beliefs that are not always accurate. Many consumers remain confident that they have identified lower-priced options even when they have not. Additionally, many consumers believe that partitioned prices signal transparency, although we demonstrate that sellers who chose partitioned disclosures in a simulated market study tended to report a motive to obfuscate total prices. While preferring partitioned disclosures (without totals) may not reflect a general mistake, these results suggest that the preference is exploitable. Hence, consumer preferences are a novel factor that enables firms to shroud total prices, suggesting that firms could use partitioning to shroud total prices while signaling transparency and trustworthiness.

The Speaker

Abigail Sussman is a Professor of Marketing at The University of Chicago Booth School of Business. She researches how individuals form judgments and make decisions, from underlying mechanisms to applications. She investigates questions at the intersection of psychology, marketing, finance, and economics, with the aim of improving financial well-being. Her work has been featured in top academic journals across academic fields including the Journal of Consumer Research, Psychological Science, and the Journal of Finance, as well as in popular media outlets including National Public Radio, the New York Times, and the Wall Street Journal.

Dr. Sussman is currently president-elect of the Society for Judgment and Decision Making and an associate editor at the Journal of Experimental Psychology: General. Her prior experience includes work at Goldman Sachs in its equity research division. She earned a bachelor’s degree from Brown University in cognitive science and economics, and a joint PhD from the psychology department and the School of Public and International Affairs at Princeton University.