“Whoa! It’s like Spotify but for academic articles.”

Instant Access to Thousands of Journals for just $40/month

Try 2 weeks free now

Fee or free? How much to add on for an add-on



Sellers often provide complimentary “no extra charge” add-ons (e.g., free Internet connection) to consumers who buy their primary products (e.g., a hotel stay), but recently add-ons that used to be free are offered for a fee. The conventional wisdom is that unadvertised add-ons for high fees help competitors increase profits that are competed away by advertising low prices for the basic products. This theory cannot explain why complimentary add-ons are still offered by some sellers. We show that providing complimentary add-ons can be profitable for sellers with monopoly power under certain demand conditions. If these demand conditions are not met, it is optimal to charge a supplementary fee for the add-on. We also show how pricing policy can be designed to selectively target or deter different consumer segments from purchasing the add-on to boost sellers’ profits, providing a strategic role for selling add-ons at either below-cost or at exorbitantly high prices. Yet such behavior may have repercussions for economic welfare when it results in socially inefficient giveaways when consumers would be better served with a lower price on the basic product without the add-on or, with the other extreme, when it results in excessively high prices for an add-on that restricts sales and leads to its under-provision from a societal perspective. The paper also provides managerial insights on the design and use of add-ons.



Marketing LettersSpringer Journals

Published: Mar 1, 2011

DOI: 10.1007/s11002-010-9112-3

Free Preview of First Page

Loading next page...

You’re reading a free preview. Subscribe to read the entire article.

DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy unlimited access and
personalized recommendations from
over 12 million articles from more than
10,000 peer-reviewed journals.

All for just $40/month

Try 2 weeks free now

Explore the DeepDyve Library

How DeepDyve Works

Spend time researching, not time worrying you’re buying articles that might not be useful.

Unlimited reading

Read as many articles as you need. Full articles with original layout, charts and figures. Read online, from anywhere.

Stay up to date

Keep up with your field with Personalized Recommendations and Follow Journals to get automatic updates.

Organize your research

It’s easy to organize your research with our built-in tools.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from Springer, Elsevier, Nature, IEEE, Wiley-Blackwell and more.

All the latest content is available, no embargo periods.

See the journals in your area

Simple and Affordable Pricing

14-day free trial. Cancel anytime, with a 30-day money-back guarantee.

Monthly Plan

  • Read unlimited articles
  • Personalized recommendations
  • Print 20 pages per month
  • 20% off on PDF purchases
  • Organize your research
  • Get updates on your journals and topic searches


Best Deal — 25% off

Annual Plan

  • All the features of the Professional Plan, but for 25% off!
  • For the normal price of 10 articles elsewhere, you get one full year of unlimited access to articles.

billed annually