HomeFinanceThe sneaky pricing tactic we hate but still fall for

The sneaky pricing tactic we hate but still fall for

Imagine this: you’re planning a getaway, and you find what seems like an incredible hotel deal. The room you’ve been eyeing is an enticingly low price of $99 per night. Excitedly, you proceed to book it, only to find out during the checkout process that a service fee of $15, a cleaning fee of $25 and a couple of other mysterious charges suddenly inflate your bill. When you reach the final price, that amazing offer has morphed into something far less appealing.

This is the common pricing tactic known as drip pricing. The original price that you see is very attractive, but hidden fees appear as you click through the purchase.

For Ralf Steinhauser, senior research fellow at the Australian National University’s Centre for Social Research Methods, drip pricing is particularly annoying. He knows exactly what’s going on but is largely powerless to do anything about it.

Last year, both US President Joe Biden and British Prime Minister Rishi Sunak have committed to combatting drip pricing. India recently followed suit. And in 2022, Canada passed laws prohibiting certain types of drip pricing.

Here, the Australian Competition and Consumer Commission (ACCC) has made some moves to push firms to be more careful about how they display their extra fees and charges.

However, since drip pricing is continually morphing and transforming, regulators worldwide have a challenge. Additionally, economists aren’t in agreement on how to define drip pricing – even if they know it when they encounter it. This ambiguity in definition makes it harder to regulate.

The psychology behind drip pricing

The anchoring effect

Drip pricing preys on human psychology in several ways. First and foremost, it capitalises on the anchoring effect. The initial low price serves as an anchor, setting a reference point for consumers. They mentally commit to the purchase based on this attractive starting point making it more difficult for them to abandon their shopping carts as additional costs are revealed.

Present-bias preference

The reluctance to restart the search isn’t solely a result of laziness or indecision. It’s underpinned by a psychological mechanism known as present-bias preference. This concept means that we value things immediately in front of us more than things more distant in the future.

Drip pricing exploits this cognitive bias by getting you to make a decision and commit to the transaction process. If you’re far into a complicated booking process when extra fees appear, starting all over again feels like a burden. Often enough, this means you’ll settle for the higher-priced hotel room.

Sunk-cost fallacy

The sunk-cost fallacy is a related concept. If companies strategically use obstacles and complexities in the online checkout process, it discourages customers from abandoning their transactions even after discovering the true cost. This is because individuals have already invested their time and effort and are reluctant to waste or discard it. “Starting all over feels like a huge task and you just don’t want to do that,” says Mr Steinhauser.

Loss aversion

Drip pricing doesn’t just capitalise on our desire for immediate gratification; it also preys on our instinctive fear of missing out. Loss aversion is another psychological factor manipulated by drip pricing.

It’s the notion that we feel more pain from losing something than pleasure from gaining the same thing.

Does drip pricing need more regulation?

Cost of living concerns in the UK have put drip pricing into sharp focus. Last June, Rishi Sunak ordered an inquiry by his government’s Department of Business and Trade to get a sense of how widespread and how damaging it might be. Britain’s Office of Fair Trading has found there is “no pricing scheme more pernicious than drip pricing”.

Since 2022, the Biden administration has been in ongoing war over drip pricing, or ‘junk fees’. “I know how unfair it feels when a company overcharges you and gets away with it. Not anymore,” said President Biden in June.

He is now urging Congress to pass his Junk Fees Prevention Act. If successful, it would work to eliminate service charges and other fees on online ticket sales for concerts and events. It would also eliminate airline seat booking fees for families travelling together. Resort fees tacked onto bookings for online hotel reservations for basics such as pool towels would also be eliminated.

Drip pricing in Australia

Australia doesn’t have any specific laws against drip pricing. It is tackled using broader regulations against misleading conduct and component pricing. At the moment it is limited to fees that are mandatory and quantifiable, such as credit card surcharges. Technically, by law companies must display any charge that is unavoidable as prominently as the advertised initial price. “Businesses must be upfront and clearly disclose to consumers at the start of a purchasing process the types of fees that will apply and when,” the ACCC told The Sydney Morning Herald. 

Sometimes, a company may claim that it cannot accurately calculate additional charges until a purchaser has progressed through most of the checkout process.

However, a spokesperson from the ACCC said: “Even when a mandatory charge is not quantifiable at the start of a transaction, businesses must disclose to consumers that an additional charge exists and will be added to the total cost once the transaction is finalised.”

Unfortunately, drip pricing and its associated tactics will undoubtedly continue to evolve, and loopholes will remain. Your best defence is to make well-informed decisions by understanding the reasons behind the effectiveness of this tactic. While bargains may initially capture your attention, you can equip yourself with the knowledge needed to avoid hidden costs.

How often do you purchase things online? Have you been caught out by drip pricing? Let us know in the comments section below.

Also read: How online retailers trick you into spending more

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Ellie Baxter
Ellie Baxter
Writer and editor with interests in travel, health, wellbeing and food. Has knowledge of marketing psychology, social media management and is a keen observer and commentator on issues facing older Australians.


  1. The other tactic that’s used especially by some airlines and even Ebay in the past is using the US$ as default and only having the $ symbol and it doesn’t really tell you it’s in US$’s until payment in small print which can be missed. I know a few people that have been caught out this way.

  2. It’s an absolute disgrace but you do have the choice to cancel your reservation before finalising it. What you should do next is contact the seller by email and advise him that you would not ever do business with his company again for that very reason. If everybody did this I’m sure this practice would cease and prices would be relevant to what is originally advertised. Also on a similar subject, the disgraceful inflation of hotel prices since COVID-19. The Government and Toothless ACCC have no trouble naming, shaming and ultimately fining companies for price fixing, so why don’t they do something about the tourism industry ??? Jacka.

  3. The government could compel companies to indicate the final or total cost that the customer is to pay and it is legally binding: How the total is made up is irrelevant to the customer. This goes for GST as well, which is another common con.

  4. We booked a hotel in Seattle W.A ion 2010 with a travel agent here in Oz , that has now gone bust with some shady dealings. We stayed at The Queen Anne hotel on 1st Avenue, with rooms advertised at US$99 / night including breqkfast, a very nice hotel. When we came to pay our bill, there were 2 – 3 extra charges per night, which took the total to about US$125/night. For 8 nights, that became an extra US$208, somet hing wwe hadn’t factored in. I complained to which I was told “this is a standard practice”. Yeah, knock it on the head , Joe.

  5. I have not been caught by these schemes but only because I read the fine print.
    Often what appears to be the cheapest is not when you see the details, and the details are nearly always there somewhere.
    So it comes back to buyer beware.

- Our Partners -


- Advertisment -


- Advertisment -

Log In

Forgot password?

Don't have an account? Register

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.