Signalling Price Image Using Advertised Prices
AbstractThis paper addresses the issue of retail price image by offering an explanation for how and when stores can use their advertised prices to signal the prices of other products in the store. A model of a two-product retail market is presented in which stores advertise the price of one product and customers do not know the price of the other product before selecting which store to visit. In a model with full customer information, stores with different marginal costs charge different prices for each product. When customers do not know each store's marginal cost type, an opportunity arises for each store to signal its cost type using its advertised prices. In such a model, additional equilibria exist. In particular, stores with different costs may charge the same advertised price while continuing to charge different prices for the unadvertised product. Data from competing drycleaning stores is generally consistent with the model predictions. A number of additional properties of the equilibria are discussed and possible extensions to the model are proposed.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Marketing Science.
Volume (Year): 14 (1995)
Issue (Month): 2 ()
signalling; pricing; price image; advertising;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2003.
"Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data,"
American Economic Review,
American Economic Association, vol. 93(1), pages 15-37, March.
- Judith A. Chevalier & Anil K. Kashyap & Peter E. Rossi, 2000. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," NBER Working Papers 7981, National Bureau of Economic Research, Inc.
- Peter E. Rossi & Judith A. Chevalier & Anil K. Kashyap, 2002. "Why Don't Prices Rise During Periods of Peak Demand? Evidence from Scanner Data," Yale School of Management Working Papers ysm291, Yale School of Management.
- Rhodes, Andrew, 2011. "Multiproduct pricing and the Diamond Paradox," MPRA Paper 32511, University Library of Munich, Germany.
- Glenn Ellison & Sara Fisher Ellison, 2009.
"Search, Obfuscation, and Price Elasticities on the Internet,"
Econometric Society, vol. 77(2), pages 427-452, 03.
- Glenn Ellison & Sara Fisher Ellison, 2004. "Search, Obfuscation, and Price Elasticities on the Internet," NBER Working Papers 10570, National Bureau of Economic Research, Inc.
- Glenn Ellison, 2004.
"A Model of Add-on Pricing,"
Economics Working Papers
0049, Institute for Advanced Study, School of Social Science.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.