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Nonlinear Pricing and Revealed Salience

Author

Listed:
  • Nicola Gennaioli
  • Matthias Rodemeier
  • Gregory Sun

Abstract

On a major e-commerce platform, we randomize linear promotions applying a δ% discount and nonlinear ones applying the same discount above a spending threshold of M€. We unveil a striking fact: nonlinear schemes create bunching at M but no global self-selection above M relative to linear schemes with the same discount δ. This pattern rejects optimization frictions and standard biases. We offer a salience account: upon seeing (M, δ) some people overly focus on M and cut spending above M (where the threshold should not matter), others overly focus on δ and seek discounts below M (where they do not qualify). Using browsing data on attempts to redeem promotions below M, we confirm the model's predictions and show its ability to match the spending anomalies.

Suggested Citation

  • Nicola Gennaioli & Matthias Rodemeier & Gregory Sun, 2026. "Nonlinear Pricing and Revealed Salience," CESifo Working Paper Series 12769, CESifo.
  • Handle: RePEc:ces:ceswps:_12769
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    Keywords

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    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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