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Author(s) -
Marshall Fisher,
Mehmet Gü Mü S,
Shanling Li,
Wonseok Oh,
Saibal Ray,
Mehmet Gumus,
Sai,
Yalçin Akçay,
Tamer Boyacı,
Dan Zhang,
Adam J Mersereau
Publication year - 2015
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/poms.12266
Subject(s) - citation , computer science , production (economics) , operations research , library science , economics , microeconomics , mathematics
Mehmet Gumus, Shanling Li, Wonseok Oh, and Saibal Ray study price partitioning decisions of online retailers regarding shipping and handling (S&H) fees. Specifically, they analyze two partitioning formats used by retailers. In first scenario, retailers present customers with a price that is partitioned into a product price and a separate S&H surcharge (PS strategy); in the second, customers are offered free shipping through a non-partitioned format where product price already includes shipping cost (ZS strategy). The authors conduct both analytical and empirical analyses, based on product and S&H prices data for two different product categories (digital cameras and printers), to analyze competitive dynamics between these two formats. They establish that PS retailers charge lower product prices than ZS ones, but total price charged is higher for the first group. The S&H charge for PS retailers can be significant it is, on average, 5.4% (printers) and 3.0% (digital cameras). Retailers which are popular and/or face risky cost environment are more likely to opt for ZS strategy, while retailers whose portfolio includes large or heavy products with high cost (S&H)-to-price ratios usually choose PS strategy. Lastly, this empirical study also illustrates that ZS retailers change their product prices almost 1.5 times more frequently than PS ones.