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Introduction
Imagine that you are planning a weekend trip to New York and are searching for a convenient and affordable flight at an online travel agent. Quickly, you find a suitable connection. You click on "Book Now" and enter your personal information. Just as you are about to finish the transaction, you see that the payment with your preferred credit card costs an additional US$20. Would you book the trip anyway?
Such situations are common in the marketplace. In many industries, sellers advertise low prices and reveal other surcharges sequentially as the customer goes through the buying process. These sequential, or drip-pricing , techniques are especially prevalent in electronic services. Online shops disclose service charges for credit card payments only when the purchase is almost complete. Airlines take various steps in their booking process to offer add-ons such as priority check-in or extra luggage, and car rentals disclose contract features, such as insurance, only at the end of a buying process. All these sellers make use of the sequential presentation of mandatory or optional surcharges. A frequent motivation for drip pricing is that sellers expect lower price-level perceptions, and thus increased purchase probability for their offerings (Shelanski et al. , 2012). On the one hand, sellers address consumers' increased desire for customized products or services with optional surcharges. On the other hand, some sellers also hide mandatory surcharges in their offerings and rely on customer deception. Especially, naive consumers are prone to falling prey to the deceptive influence of these "shrouded prices" (Gabaix and Laibson, 2006). Thus, it is not surprising that drip pricing has already been subject to governmental regulations from institutions such as the European Commission and the US Department of Transportation. Despite this, there is increasing interest in drip pricing in practice and academia (e.g. Gabaix and Laibson, 2006; Shelanski et al. , 2012; Muir et al. , 2013). However, scant empirical studies have investigated its consequences on consumer behavior.
This lack of studies may partly be due to confusion on two prominent concepts for multi-component prices: price partitioning and price bundling. Both concepts frequently cannot be distinguished when assessing their usage in the marketplace. Yet, literature on price partitioning focuses on mandatory surcharges, such as taxes and obligatory fees (e.g. Morwitz