Risky discounts: Do people prefer them on a per-item or per-purchase basis and why?
Risky discounts differ from other discount formats in that the actual discount level is determined by chance (e.g., “scratch & save” cards). Four studies investigated whether consumers prefer to receive risky discounts on a per-purchase or per-item basis. Although these options do not differ with regard to expected value, they entail multiple differences (e.g., savings distribution, amount of individual gains, excitement, and effort involved) that may lead to differential consumer perceptions and experiences. Controlling for expected value of savings, participants preferred per-item over per-purchase discounts. As hypothesized, the main reasons for this preference were a partly incorrect perception of the properties of the savings distribution, the adoption of a narrow mindset focusing on the best outcome in a series of discount gambles, and the greater excitement provided by multiple discount gambles.
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- Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
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- Hyeong Kim & Thomas Kramer, 2006. "The moderating effects of need for cognition and cognitive effort on responses to multi-dimensional prices," Marketing Letters, Springer, vol. 17(3), pages 193-203, July.
- LAURENT, Gilles & CHANDON, Pierre & WANSINK, Brian, 2000. "A benefit congruency framework of sales promotion effectiveness," Les Cahiers de Recherche 698, HEC Paris.
- Heath, Timothy B & Chatterjee, Subimal & France, Karen Russo, 1995. " Mental Accounting and Changes in Price: The Frame Dependence of Reference Dependence," Journal of Consumer Research, Oxford University Press, vol. 22(1), pages 90-97, June.
- Sanjay K. Dhar & Claudia González-Vallejo & Dilip Soman, 1999. "Modeling the Effects of Advertised Price Claims: Tensile Versus Precise Claims?," Marketing Science, INFORMS, vol. 18(2), pages 154-177.
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- Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
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