Purchasing professionals and the flat-rate bias: Effects of price premiums, past usage, and relational ties on price plan choice

Purchasing professionals arguably choose a price plan that leads to the lowest costs—all else being equal—for their companies when buying services. However, evidence suggests that they prefer flat rates, even where these are more expensive than pay-per-use options. A series of four experiments showed that experienced purchasing professionals tend to exhibit a flat-rate bias in their price plan choices across different business services. The experiments also investigated moderators that intensify or attenuate this bias, which decreased when the flat-rate option was the more expensive alternative but increased with past usage, with upper bound extremes. We also found directional support that the flat-rate bias increases when the buyer-seller relationship is stronger. The experiments also revealed how insurance, convenience, taximeter, overestimation, distrust, and administration effects are related to preferences for flat rates. Beyond their contribution to the pricing literature, these results provide actionable insights for marketing managers and purchasing professionals.