One such study, published last year in the journal Advances in Economic Analysis & Policy, indicates that within reasonable parameters, eBay bidders are more willing to pay $11.00 total for a CD when the price is broken out by product cost ($7.00) plus shipping and handling ($4.00) than $10.00 for a CD where the shipping and handling are free.
In my experience, I've noticed this to be absolutely true. Many times, I've come across a disgruntled buyer ranting about "$50 shipping fees for a 99 cent item!" Yet if the same buyer purchased the same item for $50 with $0.99 shipping, they'd likely be telling everyone what a great deal they found. Why? One $51 item isn't more expensive than another $51 item.
Smart buyers know to only look at the total cost. I'm not surprised at all that this article found people were more likely to pay $1 extra if the shipping charges and item cost were balanced out. I can't say I'm not disappointed when I see what looks like a great deal, only to click on the auction and find out shipping is really $35 - but if that was the cheapest on the market, I would still buy it.
There's even an argument - albeit not a morally sound one - that you can save more money by buying auctions with high shipping costs. Since eBay doesn't take final value fees - usually around 10% - out of shipping, that's a few extra dollars in the seller's pocket. Greedy, right? But in a competitive market, that can translate to a seller taking the price down a few bucks since eBay's fees are eating less of their profits.