Vol. 27, No. 2, March–April 2008, pp. 236–246 issn 0732-2399  eissn 1526-548X  08  2702  0236 inf orms ® doi 10.1287/mksc.1070.0295 © 2008 INFORMS Research Note Attention Arousal Through Price Partitioning Marco Bertini London Business School, Regent’s Park, London NW1 4SA, United Kingdom, mbertini@london.edu Luc Wathieu ESMT European School of Management and Technology, Schlossplatz 1, Berlin 10178, Germany, wathieu@esmt.org E xisting evidence suggests that preferences are affected by whether a price is presented as one all-inclusive expense or partitioned into a set of mandatory charges. To explain this phenomenon, we introduce a new mechanism whereby price partitioning affects a consumer’s perception of the secondary (i.e., nonfocal) benefits derived from a transaction. Four experiments support the hypothesis that a partitioned price increases the amount of attention paid to secondary attributes tagged with distinct price components. Characteristics of the offered secondary attributes such as their perceived value, relative importance, and evaluability can therefore determine whether price partitioning stimulates or hinders demand. Beyond its descriptive and prescriptive implications, this theory contributes to the emerging notion that pricing can transform, as well as capture, the utility of an offer. Key words : consumer behavior; pricing; price partitioning; attention; information processing; framing effects; multi-attribute utility History : This paper was received September 23, 2005, and was with the authors 13 months for 4 revisions; processed by Eric A. Greenleaf. Introduction A common approach to evaluating consumer pref- erences is to assume that individuals have a utility function defined along multiple underlying product attributes or dimensions (Keeney and Raiffa 1993). Price information then enters the consumer choice process indirectly through the budget constraint or, as is customary in conjoint and logit analysis (e.g., Green and Rao 1971, McFadden 1974), directly as a separate observable attribute in the utility function. Either way, the convention is that the role of price is to index the cost of making a purchase. From the standpoint of the firm, price is supposed to capture rather than shape value. Although this framework has been usefully applied to a variety of marketing problems, recent research on the psychological aspects of pricing suggests that the relationship between price and choice might be more complex than anticipated by standard economic principles (e.g., Winer 2005). In particular, a number of studies have shown that the way price informa- tion is presented can often influence perceptions of value (e.g., Anderson and Simester 2003, Dholakia and Simonson 2005, Heath et al. 1995, Prelec and Loewenstein 1998). Consistent with this emerging view, this paper examines the effects of presenting a price either as one all-inclusive expense or partitioned into a set of manda- tory charges. An online or catalog retailer might, for example, price DVDs at $23.45 including shipping and handling, or at $16.95 plus $6.50 for the deliv- ery service. One common intuition about price parti- tioning is that it makes transactions appear cheaper to consumers who have a tendency to discount or neglect smaller appended charges (Morwitz et al. 1998). A different point of view is that price partition- ing should actually be avoided because consumers tend to perceive multiple prices as more punishing than a single price of equal amount (Thaler 1985). Although we acknowledge that changes in price for- mat influence perceptions of costs, this research tests the additional hypothesis that a partitioned price can also increase the “depth” to which consumers analyze the various dimensions (benefits) of the offer. Our experiments show that participants presented with an all-inclusive price are likely to concentrate their eval- uation on the focal attribute of the transaction (DVDs, groceries, movie tickets, etc.). A partitioned price, on the other hand, increases the amount of attention paid to secondary attributes (shipping and handling, sched- uled delivery, advance booking, etc.), which in turn affects preference and choice. 236