Discount Pricing.
This paper investigates discount pricing, the common marketing practice whereby a price is listed as a discount from an earlier, or regular, price. We discuss two reasons why a discounted price - as opposed to a mearly low price - can make a rational consumer more willing to purchase the item. Fir...
| Main Authors: | , |
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2013
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| _version_ | 1797085892612980736 |
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| author | Armstrong, M Chen, Y |
| author_facet | Armstrong, M Chen, Y |
| author_sort | Armstrong, M |
| collection | OXFORD |
| description | This paper investigates discount pricing, the common marketing practice whereby a price is listed as a discount from an earlier, or regular, price. We discuss two reasons why a discounted price - as opposed to a mearly low price - can make a rational consumer more willing to purchase the item. First, the information that the product was initially sold at a high price can indicate the product is high quality. Second, a discounted price can signal that the product is an unusual bargain, and there is little point searching for lower prices. We also discuss a behavioral model in which consumers have an intrinsic preference for paying a below-average price. Here, a seller has an incentive to offer different prices to identical consumers, so that a proportion of its consumers enjoy a bargain. We discuss in each framework when a seller has an incentive to offer false discounts, in which the reference price is exaggerated. |
| first_indexed | 2024-03-07T02:14:21Z |
| format | Working paper |
| id | oxford-uuid:a1b7d5e6-d00d-4254-96bf-2cf6bd26c71c |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T02:14:21Z |
| publishDate | 2013 |
| publisher | Department of Economics (University of Oxford) |
| record_format | dspace |
| spelling | oxford-uuid:a1b7d5e6-d00d-4254-96bf-2cf6bd26c71c2022-03-27T02:15:08ZDiscount Pricing.Working paperhttp://purl.org/coar/resource_type/c_8042uuid:a1b7d5e6-d00d-4254-96bf-2cf6bd26c71cEnglishDepartment of Economics - ePrintsDepartment of Economics (University of Oxford)2013Armstrong, MChen, YThis paper investigates discount pricing, the common marketing practice whereby a price is listed as a discount from an earlier, or regular, price. We discuss two reasons why a discounted price - as opposed to a mearly low price - can make a rational consumer more willing to purchase the item. First, the information that the product was initially sold at a high price can indicate the product is high quality. Second, a discounted price can signal that the product is an unusual bargain, and there is little point searching for lower prices. We also discuss a behavioral model in which consumers have an intrinsic preference for paying a below-average price. Here, a seller has an incentive to offer different prices to identical consumers, so that a proportion of its consumers enjoy a bargain. We discuss in each framework when a seller has an incentive to offer false discounts, in which the reference price is exaggerated. |
| 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 |