IngentaConnect Bundles = discount? Revisiting complex theories of bundle effects

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Abstract:

Purpose - The paper seeks to propose and test a theory of the psychological impact of price bundling that is derived from bundling's economic impact. It is called the inferred bundle saving hypothesis. In the absence of explicit information about bundle savings, consumers infer a bundle saving when presented with a bundle offer. It is suggested that inferred bundle saving provides a simple, parsimonious explanation for pre- and post-purchase bundle effects. Design/methodology/approach - The theory is tested in two laboratory studies that employ partial replications of two prior price bundle studies. Findings - The results show that the inferred bundle saving effect is robust in both product and service contexts, and can potentially explain the bundle effects found in these two studies. Research limitations/implications - Additional experimental studies are recommended to further test the proposed theory. Practical implications - First, contrary to convention, it is not always optimal for firms to integrate price information in a single bundle price. Second, firms may sometimes use the price-bundling format to signal a bundle saving without actually offering one. Third, firms can manage consumption and expected refund of bundles by manipulating consumer perception of bundle saving. Originality/value - It is intuitive that consumers expect a bundle saving. However, this paper is the first to establish empirically the existence of this inferred bundle saving and demonstrate its potential as a theoretical explanation for various bundle effects. The research challenges the extant view that price bundling <IT>per se</IT> always enhances consumer pre-purchase evaluation. Moreover, it connects economic and psychological research, as well as pre- and post-purchase analysis, of bundle effects.