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 |
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University of Oxford
2012
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| _version_ | 1826301997412777984 |
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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 | 2024-03-07T05:40:51Z |
| format | Working paper |
| id | oxford-uuid:e5824f4c-a77d-4679-9a78-150cd83a6b42 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T05:40:51Z |
| publishDate | 2012 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:e5824f4c-a77d-4679-9a78-150cd83a6b422022-03-27T10:24:28ZDiscount pricingWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:e5824f4c-a77d-4679-9a78-150cd83a6b42Symplectic ElementsBulk import via SwordUniversity of Oxford2012Armstrong, 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 |