This article analyzes recent regulatory and litigation trends surrounding partitioned pricing.
In recent months, various groups—including the Federal Trade Commission (FTC) and other high-level government regulators—have raised questions about the appropriateness of “add on” charges paid by consumers who are buying products and services, often called “partitioned pricing.” Although the issue has recently been gaining attention among popular audiences, economists and marketers have studied the issue of partitioned pricing, sometimes referred to as “drip pricing” or “shrouded pricing,” for decades.
In this article, authors Ashish Pradhan and Alex Yavorsky analyze some recent regulatory and litigation activity, summarize the relevant academic research on partitioned pricing, and explore how to test the impact (if any) of this common practice. While the use of partitioned and drip pricing is sometimes characterized as systematically harmful to consumers, the practice may in fact carry benefits. Furthermore, it is not always clear that alternative presentations of prices would lead consumers to make different choices. Accordingly, determining the impact of partitioned or drip pricing on consumer decisions in any particular situation is highly context dependent and requires careful analysis.
This article was originally published by Law360 in December 2022.