Abstract for: The Hidden Cost of Hidden Fees: Price Obfuscation in Online Platforms

Recent work in operations management has shown that firms can create value for themselves and their customers by increasing cost transparency, while research on the effects of price salience continues to show that price partitioning and obfuscation can generate additional sales and increased revenues for firms, which persist beyond the first purchase. This tension is evidenced across industries, and is especially salient in online retail, where few companies have moved to increase cost transparency. In this work in progress study, we propose to build a model of firm and consumer behavior to study the mechanisms that drive a firm’s choice for increased transparency, and can explain resulting sustained performance differences.