The proliferation of surcharges in service pricing raises theoretical and pragmatic questions regarding their impact on consumers. This research investigates how surcharges influence consumer responses to a service price increase. We propose that various kinds of surcharge information act in concert to drive blame attributions for a price increase: Internal (vs. external) surcharges increase blame attributions and minimize the influence of other drivers captured in surcharge information such as temporal stability, surcharge benefit, and more than one kind of surcharge. In comparison to all-inclusive pricing, we find that (i) surcharge pricing is detrimental to service firms when surcharges cue internal locus of causality, regardless of the temporal stability or surcharge benefit, whereas (ii) surcharge pricing is beneficial when surcharges cue external locus of causality, particularly when the surcharges are permanent and high benefit; (iii) consumers are more sensitive to increases in the magnitude of internal (vs. external) surcharges; and (iv) in the case of mixed surcharges, internal surcharges are more prominent and minimize the buffering effect of adding external surcharges. Based on our findings, we make recommendations to managers on the optimal design of surcharge pricing to mitigate negative blame reactions when communicating service price increases to consumers.
All Science Journal Classification (ASJC) codes
- Information Systems
- Sociology and Political Science
- Organizational Behavior and Human Resource Management