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Can Bait and Switch Benefit Consumers?

Author

Listed:
  • Eitan Gerstner

    (North Carolina State University)

  • James D. Hess

    (North Carolina State University)

Abstract

We present a model that leads to an equilibrium with characteristics similar to the following stylized facts observed in retail markets: (a) Retailers advertise only selected brands; (b) Often low priced advertised brands are understocked; (c) In-store promotions are biased towards more expensive substitute brands. Together these practices constitute illegal bait and switch. Is this phenomenon necessarily harmful to consumers and to the economy? We show that bait and switch can benefit consumers because utility is created through in-store promotions and price competition is enhanced. This suggests that the FTC investigate further its ban on bait and switch.

Suggested Citation

  • Eitan Gerstner & James D. Hess, 1990. "Can Bait and Switch Benefit Consumers?," Marketing Science, INFORMS, vol. 9(2), pages 114-124.
  • Handle: RePEc:inm:ormksc:v:9:y:1990:i:2:p:114-124
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    File URL: http://dx.doi.org/10.1287/mksc.9.2.114
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    Citations

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    Cited by:

    1. Mark Bergen & Daniel Levy & Sourav Ray & Paul H. Rubin & Benjamin Zeliger, 2008. "When Little Things Mean a Lot: On the Inefficiency of Item-Pricing Laws," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 209-250, May.
    2. James D. Hess & Eitan Gerstner, 1998. "Yes, “Bait and Switch” Really Benefits Consumers," Marketing Science, INFORMS, vol. 17(3), pages 283-289.
    3. Pradeep Bhardwaj & Yuxin Chen & David Godes, 2008. "Buyer-Initiated vs. Seller-Initiated Information Revelation," Management Science, INFORMS, vol. 54(6), pages 1104-1114, June.
    4. Antonio Rosato, 2016. "Selling substitute goods to loss-averse consumers: limited availability, bargains, and rip-offs," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 709-733, August.
    5. Luís Cabral, 2012. "Lock in and switch: Asymmetric information and new product diffusion," Quantitative Marketing and Economics (QME), Springer, vol. 10(3), pages 375-392, September.
    6. Sandro Ambuehl, 2017. "An Offer You Can't Refuse? Incentives Change How We Inform Ourselves and What We Believe," CESifo Working Paper Series 6296, CESifo Group Munich.
    7. Chiang, Wei-yu Kevin, 2010. "Product availability in competitive and cooperative dual-channel distribution with stock-out based substitution," European Journal of Operational Research, Elsevier, vol. 200(1), pages 111-126, January.
    8. William L. Wilkie & Carl F. Mela & Gregory T. Gundlach, 1998. "Does “Bait and Switch” Really Benefit Consumers?," Marketing Science, INFORMS, vol. 17(3), pages 273-282.
    9. William L. Wilkie & Carl F. Mela & Gregory T. Gundlach, 1998. "Does “Bait and Switch” Really Benefit Consumers? Advancing the Discussion …," Marketing Science, INFORMS, vol. 17(3), pages 290-293.
    10. Eitan Gerstner & Barak Libai, 2006. "—Why Does Poor Service Prevail?," Marketing Science, INFORMS, vol. 25(6), pages 601-603, 11-12.

    More about this item

    Keywords

    pricing; promotion; regulation; bait and switch;

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