Are consumers fooled by discounts? An experimental test in a consumer search environment

Bayer, Ralph C. & Ke, Changxia (2011) Are consumers fooled by discounts? An experimental test in a consumer search environment. The Economic Record, 87(279), pp. 575-586.

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Abstract

In this article, we investigate experimentally whether people search optimally and how price promotions influence search behaviour. We implement a sequential search task with exogenous price dispersion in a baseline treatment and introduce discounts in two experimental treatments. We find that search behaviour is roughly consistent with optimal search but also observe some discount biases. If subjects do not know in advance where discounts are offered, the purchase probability is increased by 19 percentage points in shops with discounts, even after controlling for the benefit of the discount and for risk preferences. If consumers know in advance where discounts are given, then the bias is only weakly significant and much smaller (7 percentage points).

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2 citations in Web of Science®

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ID Code: 62185
Item Type: Journal Article
Refereed: Yes
DOI: 10.1111/j.1475-4932.2011.00724.x
ISSN: 1475-4932
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Deposited On: 29 Aug 2013 05:18
Last Modified: 29 Aug 2013 23:41

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