Menu-Induced Preference Cannibalization: A Field Study on Designing Probabilistic Price Promotions

An increasing number of companies adopt probabilistic price promotions, where consumer benefits depend on chance. Given that consumers vary in their risk preferences, should firms offer both fixed and probabilistic promotions in a menu to enhance self-selection, or stick with a single promotion type? This research examines how promotion menus affect purchase and post-purchase consumption. Across two field experiments and one preregistered online study, we find that offering a promotion menu reduces consumers’ purchase incidence compared to a single promotion scheme. However, conditional on purchase, consumers selecting from the menu demonstrate greater post-purchase consumption, indicating a stronger sunk cost effect. These findings indicate a preference cannibalization effect, where the perceived value of each option is reduced by the presence of alternative options. The results shed light on the design of price promotion strategies: while menus can reduce initial purchase incidence, they are less likely to diminish post-purchase engagement.