Pricing for Real Consumers: Free Units, Surprise Penalties, and Bill-shock
Michael Grubb, Asst. Professor of Applied Economics, Sloan
Tue Jan 25, 02-03:00pm, E51-145
No enrollment limit, no advance sign up
Opening a cellular phone bill can lead to a nasty surprise - talking beyond the 'free' allowance can easily incur overage charges several times higher than the monthly fee. Opening a checking-account statement can be just as scary. In 2009, overdraft charges exceeded $35 billion. Firms adopt such pricing tactics - offering allowances of free units followed by steep penalties - as a natural consequence of consumer overconfidence and inattention. Recent regulatory proposals, such as the FCC's proposed bill-shock regulation, may help or harm consumers.
Contact: Ruth Levitsky, E52-252, x3-3399, levitsky@mit.edu
Sponsor: Economics
Latest update: 14-Jan-2011
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