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Discounts and Deadlines in Consumer Search

Author

Listed:
  • Dominic Coey
  • Bradley J. Larsen
  • Brennan C. Platt

Abstract

We present a new equilibrium search model where consumers initially search among discount opportunities, but are willing to pay more as a deadline approaches, eventually turning to full-price sellers. The model predicts equilibrium price dispersion and rationalizes discount and full-price sellers coexisting without relying on ex ante heterogeneity. We apply the model to online retail sales via auctions and posted prices, where failed attempts to purchase reveal consumers' reservation prices. We find robust evidence supporting the theory. We quantify dynamic search frictions arising from deadlines and show how, with deadline-constrained buyers, seemingly neutral platform fee increases can cause large market shifts.

Suggested Citation

  • Dominic Coey & Bradley J. Larsen & Brennan C. Platt, 2020. "Discounts and Deadlines in Consumer Search," American Economic Review, American Economic Association, vol. 110(12), pages 3748-3785, December.
    • Handle: RePEc:aea:aecrev:v:110:y:2020:i:12:p:3748-85
    DOI: 10.1257/aer.20190460
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    Citations

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    Cited by:

    1. Vilhuber, Lars, 2023. "Reproducibility and transparency versus privacy and confidentiality: Reflections from a data editor," Journal of Econometrics, Elsevier, vol. 235(2), pages 2285-2294.
    2. Fei Li & Charles Murry & Can Tian & Yiyi Zhou, 2024. "Inventory Management In Decentralized Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 431-470, February.
    3. Joachim Freyberger & Bradley J. Larsen, 2022. "Identification in ascending auctions, with an application to digital rights management," Quantitative Economics, Econometric Society, vol. 13(2), pages 505-543, May.
    4. Caio Waisman, 2021. "Selling mechanisms for perishable goods: An empirical analysis of an online resale market for event tickets," Quantitative Marketing and Economics (QME), Springer, vol. 19(2), pages 127-178, June.
    5. Daniel Garcia, 2017. "Dynamic Pricing with Search Frictions," Vienna Economics Papers vie1703, University of Vienna, Department of Economics.
    6. repec:spo:wpecon:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    7. Hämäläinen, Saara, 2022. "Multiproduct search obfuscation," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    8. Matthew Backus & Gregory Lewis, 2016. "Dynamic Demand Estimation in Auction Markets," NBER Working Papers 22375, National Bureau of Economic Research, Inc.
    9. Guo, Junjie, 2024. "Sequential job posting and equilibrium wage dispersion with bunching," Labour Economics, Elsevier, vol. 87(C).
    10. Marleen Marra, 2024. "Estimating and Auction Platform Game with Two-Sided Entry," Sciences Po Economics Publications (main) hal-03393068, HAL.
    11. David Bounies & Antoine Dubus & Patrick Waelbroeck, 2020. "Market for Information and Selling Mechanisms," Working Papers ECARES 2020-07, ULB -- Universite Libre de Bruxelles.
    12. Hanzhe Zhang, 2021. "Prices versus auctions in large markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(4), pages 1297-1337, November.
    13. Dominic Coey & Bradley J. Larsen & Kane Sweeney & Caio Waisman, 2021. "Scalable Optimal Online Auctions," Marketing Science, INFORMS, vol. 40(4), pages 593-618, July.
    14. Liu, Jiacheng & Wang, Yaojing & Yao, Yi, 2024. "Anticipated benefit termination and health care consumption responses: Evidence from a quasi-experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    15. repec:spo:wpmain:info:hdl:2441/5kht5rc22p99sq5tol4efe4ssb is not listed on IDEAS
    16. Daniel Garcia, 2017. "Dynamic Pricing with Search Frictions," CESifo Working Paper Series 6765, CESifo.

    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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