Conditioning prices on search behaviour
AbstractWe consider a market in which firms can partially observe each consumer's search behavior in the market. In our main model, a firm knows whether a consumer is visiting it for the first time or whether she is returning after a previous visit. Firms have an incentive to offer a lower price on a first visit than a return visit, so that new consumers are offered a "buy-now" discount. The ability to offer such discounts acts to raise all prices in the market. If firms cannot commit to their buy-later price, in many cases firms make "exploding" offers, and consumers never return to a previously sampled firm. Likewise, if firms must charge the same price to all consumers, regardless of search history, we show that they sometimes have the incentive to make exploding offers. We also consider other ways in which firms could use information about search behaviour to determine their prices.
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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19985.
Date of creation: Jan 2010
Date of revision:
Consumer search; oligopoly; price discrimination; high-pressure selling; exploding offers; costly recall;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Mark Armstrong & Jidong Zhou, 2010.
"Exploding Offers and Buy-Now Discounts,"
EERI Research Paper Series
EERI_RP_2010_44, Economics and Econometrics Research Institute (EERI), Brussels.
- Armstrong, Mark & Zhou, Jidong, 2010. "Exploding offers and buy-now discounts," MPRA Paper 24849, University Library of Munich, Germany.
- Mark Armstrong & Jidong Zhou, 2011. "Exploding Offers and Buy-Now Discounts," Economics Series Working Papers 575, University of Oxford, Department of Economics.
- Armstrong, Mark & Zhou, Jidong, 2010. "Exploding offers and buy-now discounts," MPRA Paper 22531, University Library of Munich, Germany.
- Mark Armstrong & Jidong Zhou, 2011. "Exploding Offers and Buy-Now Discounts," Working Papers 11-18, New York University, Leonard N. Stern School of Business, Department of Economics.
- Maarten C.W. Janssen & Alexei Parakhonyak, 2011. "Consumer Search Markets with Costly Second Visits," Vienna Economics Papers 1102, University of Vienna, Department of Economics.
- S. Nuray Akin & Brennan Platt, 2012. "A theory of search with deadlines and uncertain recall," Working Papers 2012-3, University of Miami, Department of Economics.
- Brennan Platt & Nuray Akin, 2012. "A theory of search with recall and uncertain deadlines," 2012 Meeting Papers 777, Society for Economic Dynamics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.