Advanced Search
MyIDEAS: Login

Discount Pricing

Contents:

Author Info

  • Armstrong, Mark
  • Chen, Yongmin

Abstract

We investigate the marketing practice of framing a price as a discount from an earlier price. 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 product is high quality. Second, a high initial price can signal a bargain relative to other options, and there is less incentive to search. We also discuss a behavioral model where the propensity to buy increases when others pay more. A seller has an incentive to offer false discounts, where the initial price is exaggerated.

Download Info

If 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.
File URL: http://www.cepr.org/pubs/dps/DP9327.asp
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9327.

as in new window
Length:
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:cpr:ceprdp:9327

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: consumer protection; consumer search; false advertising; price discrimination; Reference dependence;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
  2. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2010. "Salience and consumer choice," Economics Working Papers 1252, Department of Economics and Business, Universitat Pompeu Fabra, revised May 2012.
  3. Paul Heidhues & Botond Köszegi, 2004. "The Impact of Consumer Loss Aversion on Pricing," CIG Working Papers SP II 2004-17, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  4. Zhou, Jidong, 2008. "Reference Dependence and Market Competition," MPRA Paper 9370, University Library of Munich, Germany.
  5. Kyle Bagwell & Michael Riordan, 1988. "High and Declining Prices Signal Product Quality," Discussion Papers 808, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Urbany, Joel E & Bearden, William O & Weilbaker, Dan C, 1988. " The Effect of Plausible and Exaggerated Reference Prices on Consumer Perceptions and Price Search," Journal of Consumer Research, University of Chicago Press, vol. 15(1), pages 95-110, June.
  7. Nicola Gennaioli & Alberto Martin & Stefano Rossi, 2012. "Sovereign Default, Domestic Banks, and Financial Institutions," Working Papers 462, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. Edward P. Lazear, 1984. "Retail Pricing and Clearance Sales," NBER Working Papers 1446, National Bureau of Economic Research, Inc.
  9. C. Puppe & S. Rosenkranz, 2006. "Why suggest non-binding retail prices ?," Working Papers 06-10, Utrecht School of Economics.
  10. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mark Armstrong & Jidong Zhou, 2013. "Search Deterrence," Economics Series Working Papers 661, University of Oxford, Department of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:9327. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.