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Dissertation/Thesis Abstract

When Shrouded Prices Signal Transparency: Consequences of Price Disaggregation
by White, Shannon, Ph.D., The University of Chicago, 2020, 203; 27955834
Abstract (Summary)

This dissertation explores the impact of price disaggregation on disclosure preferences and consumer choices. Rather than competing on price, firms may make prices more complex and hence more difficult to compare. One method for increasing price complexity is disaggregating (or partitioning) prices, which can effectively hide prices in plain sight. But how do consumers react to this type of complexity?

In Chapter 1, I first demonstrate across a variety of products that consumers can have a preference for costly complexity; in other words, consumers can both prefer more complex disclosures and show a greater propensity to choose higher-price (but no higher-quality) options when disclosures are complex. These preferences are sticky, not substantially changing after a price-comparison task or after being warned about downsides of complexity. Attitudinal measures suggest that general (and potentially misapplied) beliefs about price disclosures, as well as overconfidence in price-comparison abilities, are associated with a preference for costly complexity.

In Chapter 2, I explore the robustness of the effect with abstract scenarios and find similar results. Exploratory analyses suggest a strong tendency among consumers to infer meaning from information presented to them—especially among those who prefer more complex disclosures—suggesting that some consumers may infer meaning from pricing information that firms use merely to obfuscate the total price.

In Chapter 3, I broaden the scope of choice contexts. First, because many disclosures in the real world have both disaggregated prices and the total price, I examine relative preferences for this type of “combo” disclosure. Most prefer having both more pricing information (disaggregated prices) and easier-to-process pricing information (total price), though a majority prefer the former to the latter when a tradeoff is forced. Next, I show that when consumers choose between products that may have different disclosure types, the presence of at least one complex disclosure in a choice set significantly increases the likelihood of consumers choosing higher-price options; additionally, participants as “sellers” with more expensive products are slightly more likely to display prices in complex ways, which makes their products more likely to be selected by consumers. These findings show how not all firms in a market need obfuscate the total price in order to substantially impact consumers’ ability to compare prices; a few “bad actors” may drive up the average price paid by consumers.

Appendices complement key findings in the main dissertation, including a meta-analysis of numerous outcomes in the first nine studies (Appendix 1); supplemental analyses for studies in the main dissertation, including a demonstration that increasing the price difference between two options reduces but does not eliminate the impact of complexity on participants’ ability to compare prices (Appendix 2); and supplemental studies, including a factor analysis of general beliefs about disclosures (Appendix 3).

The results of this dissertation suggest that consumers like the information in complex disclosures but commit computational errors while believing they will not. Even after experience or when warned, they maintain preferences that may affect the consumer decision making process and ultimately cost them.

Indexing (document details)
Advisor: Sussman, Abigail
Commitee: Urminsky, Oleg, Risen, Jane, Hsee, Christopher
School: The University of Chicago
Department: Business
School Location: United States -- Illinois
Source: DAI-A 82/1(E), Dissertation Abstracts International
Subjects: Psychology, Public policy, Economics
Keywords: Consumer preferences, Economics of information, Price complexity, Psychology of information, Public policy, Shrouded attributes
Publication Number: 27955834
ISBN: 9798662396814
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