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Effects of Price Promotions on Variety-Seeking and Reinforcement Behavior

Author

Listed:
  • Barbara E. Kahn

    (University of Pennsylvania)

  • Jagmohan S. Raju

    (University of California, Los Angeles)

Abstract

A stochastic model is proposed to examine how changes in frequency of price discounts affect brand choice decisions of consumers who exhibit variety-seeking and reinforcement behavior. It is shown that the effect on choice depends on whether the brand offering discounts is a major or minor brand in the product category. This model extends the existing literature on stochastic models of variety-seeking behavior by explicitly incorporating switching due to promotions along with intrinsic switching due to variety-seeking. The model yields testable hypotheses which are supported in a laboratory experiment and on analyses of the IRI cracker data.

Suggested Citation

  • Barbara E. Kahn & Jagmohan S. Raju, 1991. "Effects of Price Promotions on Variety-Seeking and Reinforcement Behavior," Marketing Science, INFORMS, vol. 10(4), pages 316-337.
    • Handle: RePEc:inm:ormksc:v:10:y:1991:i:4:p:316-337
    DOI: 10.1287/mksc.10.4.316
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