Loss-leader pricing and upgrades
A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing loss-leader theories in that firms make a loss on some consumers (who buy the basic version of the good) and a profit on others (who buy the upgrade).
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.
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.
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.:
- Kyle Bagwell & Garey Ramey, 1990.
"Advertising and Coordination,"
903, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Zhijun Chen & Patrick Rey, 2010.
"Loss Leading as an Exploitative Practice,"
- Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," TSE Working Papers 10-218, Toulouse School of Economics (TSE), revised Dec 2011.
- Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," IDEI Working Papers 658, Institut d'Économie Industrielle (IDEI), Toulouse, revised Dec 2011.
- Glenn Ellison, 2005. "A Model of Add-On Pricing," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 585-637.
- Duncan Simester, 1997. "Note. Optimal Promotion Strategies: A Demand-Sided Characterization," Management Science, INFORMS, vol. 43(2), pages 251-256, February.
- repec:oup:restud:v:61:y:1994:i:1:p:153-72 is not listed on IDEAS
- James D. Hess & Eitan Gerstner, 1987. "Loss Leader Pricing and Rain Check Policy," Marketing Science, INFORMS, vol. 6(4), pages 358-374.
- Duncan Simester, 1995. "Signalling Price Image Using Advertised Prices," Marketing Science, INFORMS, vol. 14(2), pages 166-188.
- DeGraba, Patrick, 2006. "The loss leader is a turkey: Targeted discounts from multi-product competitors," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 613-628, May.
- Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
- Rosato, Antonio, 2013. "Selling Substitute Goods to Loss-Averse Consumers: Limited Availability, Bargains and Rip-offs," MPRA Paper 47168, University Library of Munich, Germany.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:122:y:2014:i:1:p:19-22. 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: (Zhang, Lei)
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.