The sunk-cost effect and optimal two-part pricing |
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| Authors: | X Henry Wang Bill Z Yang |
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| Institution: | 1. Department of Economics, University of Missouri, Columbia, USA
2. School of Economic Development, Georgia Southern University, Statesboro, USA
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| Abstract: | This paper examines how the sunk-cost effect on consumers’ purchasing behavior may reset the optimal two-part pricing. It
shows that the sunk-cost effect of a membership fee provides the firm an incentive to raise the unit price and/or to increase
the market coverage by charging a lower membership fee. |
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