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22 -- Part 5: Consumer Choice: Utility Theory
The provision of internet service in hotels is an application of the percentage shortcut.
Internet service can either be part of the room charge or a separate charge.
High-price hotels have a separate charge, while low-price hotels include Internet service as part of the room charge.
In a low-price hotel, a separate charge of $10 per day is a 20 percent surcharge, a relatively large surcharge in percentage terms.
Consumers are likely to react strongly to a large surcharge.
In a hotel with a price of $200 per night, a separate charge of $10 is only 5 percent of the price, a small percentage that the consumer response is likely to be relatively small.
3 Choices are influenced by irrelevant alternatives in the appendix to the chapter on consumer choice.
Spending choices can be influenced by the source of income.
The willingness to pay for a product can be affected by irrelevant information.
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