Add-on pricing: theory and evidence from the cruise industry

Savioli, Marco ; Zirulia, Lorenzo (2015) Add-on pricing: theory and evidence from the cruise industry. Bologna: Dipartimento di Scienze economiche DSE, p. 36. DOI 10.6092/unibo/amsacta/4342. In: Quaderni - Working Paper DSE (1026). ISSN 2282-6483.
Full text disponibile come:
[thumbnail of WP1026.pdf]
Anteprima
Documento PDF
Licenza: Creative Commons Attribution Non-commercial 3.0 (CC BY-NC 3.0)

Download (819kB) | Anteprima

Abstract

In many industries, firms give consumers the opportunity to add (at a price) optional goods and services to a baseline product. The aim of our paper is to provide a theoretical model of add-on pricing in competitive environments with two new distinctive features. First, we discuss the choice of offering the add-on, assuming that this entails a fixed cost. Second, we allow firms to have a varying degree of market power over the add-on, associated with the ability to capture the value that consumers obtain from such an additional good/service. Our model shows that the conventional wisdom, according to which offering the add-on should unambiguously lower the price of the baseline product, is not always supported. In asymmetric equilibria, in which only one firm offers the add-on, baseline prices are higher if the firm’s market power over the add-on is limited. The predictions of the model are confirmed by a hedonic price model on a dataset of cruises offered worldwide.

Abstract
Tipologia del documento
Monografia (Working paper)
Autori
AutoreAffiliazioneORCID
Savioli, Marco
Zirulia, Lorenzo
Parole chiave
Add-on pricing, Cruise industry, Hedonic regression
Settori scientifico-disciplinari
ISSN
2282-6483
DOI
Data di deposito
04 Set 2015 10:15
Ultima modifica
23 Ott 2015 09:09
URI

Altri metadati

Statistica sui download

Statistica sui download

Gestione del documento: Visualizza il documento

^