AbstractA seller wishes to prevent the discovery of rival offers by its prospective customers.� We study sales techniques which serve this purpose by making it harder for a customer to return to buy later after a search for alternatives.� These include making an exploding offer, offering a "buy-now" discount, or requiring payment of a deposit in order to buy later.� It is unilaterally profitable for a seller to deter search under mild conditions, but sellers can suffer�when all do so.� In a monopoly setting where the buyer has an uncertain outside option, the optimal selling mechanism features both buy-now discounts and deposit contracts.� When a seller cannot commit to its policy, it exploits the inference that those consumers who try to buy later have no good alternative.� In many cases the outcome then involves exploding offers, so that no consumers return to buy after search.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 661.
Date of creation: 27 Jun 2013
Date of revision:
Consumer search; sales techniques; price discrimination; sequential search;
Other versions of this item:
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L80 - Industrial Organization - - Industry Studies: Services - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-28 (All new papers)
- NEP-COM-2013-07-28 (Industrial Competition)
- NEP-MKT-2013-07-28 (Marketing)
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