Empirical studies provide evidence that many consumers prefer a flat-rate, even though their billing rate would be lower on a pay-per-use tariff. When it comes to tariff choices, some consumers thus seem to be subject to a cognitive error, a so-called “flat-rate bias”. Based on survey data, we analyse causes and strategies to enhance the occurrence and intensity of flat-rate biases within 2 studies. The results of study 1 (n=104) point out to five important drivers of flat-rate biases, namely the taximeter, insurance, overestimation, convenience and smart-shopping effect. Within study 2 (n=416), we subsequently evaluate the effectiveness of advertisements using the identified causes for a flat-rate bias as setting levers to increase consumers' tariff-specific willingness-to-pay. Our findings show that the most effective way to enhance the return on flat-rate bias would be to enhance communication of the fact that consumers can protect themselves from fluctuations in the billing amount through a flat rate (insurance effect) and that consumers must not worry about costs when using a flat rate (taximeter effect).

• Sven Heidenreich(EBS Business School)
• Tobias Krämer(University of Koblenz-Landau)
• Matthias Gouthier(University of Koblenz-Landau)
• Matthias Handrich(EBS Business School)