Discount pricing
We investigate the practice of framing a price as a discount from an earlier price, with information such as "was USD200, now USD100". We discuss two reasons why a discounted price- rather than a merely low price- can make a consumer more willing to purchase. First, a high initial price ca...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
| Published: |
Wiley
2019
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| _version_ | 1797065014193946624 |
|---|---|
| author | Armstrong, M Chen, Y |
| author_facet | Armstrong, M Chen, Y |
| author_sort | Armstrong, M |
| collection | OXFORD |
| description | We investigate the practice of framing a price as a discount from an earlier price, with information such as "was USD200, now USD100". We discuss two reasons why a discounted price- rather than a merely low price- can make a consumer more willing to purchase. First, a high initial price can indicate the seller has chosen to supply a high-quality product. Second, when a seller with limited stock runs a clearance sale, later consumers infer that unsold stock has higher expected quality when its initial price was higher. We also suggest a behavioural explanation, which is that consumers with reference-dependence preferences are more likely to buy if they perceive the price as a bargain relative to the earlier price. Discount pricing is therefore an effective marketing technique, and a seller may wish to deceive potential customers by offering a false discount. The welfare effects of regulation to prevent fictitious pricing are subtle, possible with unintended consequences, partly depending on whether consumers are sophisticated or naive. |
| first_indexed | 2024-03-06T21:22:34Z |
| format | Journal article |
| id | oxford-uuid:41f78ceb-a35d-47df-944d-76449ad15ae4 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-06T21:22:34Z |
| publishDate | 2019 |
| publisher | Wiley |
| record_format | dspace |
| spelling | oxford-uuid:41f78ceb-a35d-47df-944d-76449ad15ae42022-03-26T14:46:52ZDiscount pricingJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:41f78ceb-a35d-47df-944d-76449ad15ae4EnglishSymplectic Elements at OxfordWiley2019Armstrong, MChen, YWe investigate the practice of framing a price as a discount from an earlier price, with information such as "was USD200, now USD100". We discuss two reasons why a discounted price- rather than a merely low price- can make a consumer more willing to purchase. First, a high initial price can indicate the seller has chosen to supply a high-quality product. Second, when a seller with limited stock runs a clearance sale, later consumers infer that unsold stock has higher expected quality when its initial price was higher. We also suggest a behavioural explanation, which is that consumers with reference-dependence preferences are more likely to buy if they perceive the price as a bargain relative to the earlier price. Discount pricing is therefore an effective marketing technique, and a seller may wish to deceive potential customers by offering a false discount. The welfare effects of regulation to prevent fictitious pricing are subtle, possible with unintended consequences, partly depending on whether consumers are sophisticated or naive. |
| spellingShingle | Armstrong, M Chen, Y Discount pricing |
| title | Discount pricing |
| title_full | Discount pricing |
| title_fullStr | Discount pricing |
| title_full_unstemmed | Discount pricing |
| title_short | Discount pricing |
| title_sort | discount pricing |
| work_keys_str_mv | AT armstrongm discountpricing AT cheny discountpricing |