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Discounts and Deadlines in Consumer Search

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  • Dominic Coey
  • Bradley Larsen
  • Brennan Platt

Abstract

We present a new equilibrium search model where consumers initially search among discount opportunities, but are willing to pay more as a deadline approaches, eventually turning to full-price sellers. The model predicts equilibrium price dispersion and rationalizes discount and full-price sellers coexisting without relying on ex-ante heterogeneity. We apply the model to online retail sales via auctions and posted prices, where failed attempts to purchase a good reveal consumers' reservation prices. We find robust evidence supporting the theory, and demonstrate that ignoring buyer deadlines can distort estimates of market welfare, consumer demand, and underlying causes of market shifts.

Suggested Citation

  • Dominic Coey & Bradley Larsen & Brennan Platt, 2016. "Discounts and Deadlines in Consumer Search," NBER Working Papers 22038, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22038
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    Citations

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    Cited by:

    1. Caio Waisman, 2021. "Selling mechanisms for perishable goods: An empirical analysis of an online resale market for event tickets," Quantitative Marketing and Economics (QME), Springer, vol. 19(2), pages 127-178, June.
    2. Marleen Marra, 2019. "Pricing and Fees in Auction Platforms with Two-Sided Entry," Sciences Po Economics Discussion Papers 2020-02, Sciences Po Departement of Economics.
    3. Matthew Backus & Gregory Lewis, 2016. "Dynamic Demand Estimation in Auction Markets," NBER Working Papers 22375, National Bureau of Economic Research, Inc.
    4. David Bounie & Antoine Dubus & Patrick Waelbroeck, 2022. "Market for Information and Selling Mechanisms," CER-ETH Economics working paper series 22/367, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    5. Daniel Garcia, 2017. "Dynamic Pricing with Search Frictions," CESifo Working Paper Series 6765, CESifo.
    6. Hanzhe Zhang, 2021. "Prices versus auctions in large markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(4), pages 1297-1337, November.
    7. Marleen Marra, 2019. "Pricing and Fees in Auction Platforms with Two-Sided Entry," Working Papers hal-03393068, HAL.
    8. Marleen Marra, 2019. "Pricing and Fees in Auction Platforms with Two-Sided Entry," Sciences Po publications 2020-02, Sciences Po.
    9. Daniel Garcia, 2017. "Dynamic Pricing with Search Frictions," CESifo Working Paper Series 6765, CESifo.

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    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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