Is there an Exclusionary Effect of Retroactive Price Reduction Schemes?

Lisa Bruttel

No 2013-21, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: This paper presents an experiment on the loyalty enhancing effect potentially created by retroactive price reduction schemes. Such price reductions are applied to all units bought in a certain time frame if the total quantity passes a given threshold. Close to the threshold, the marginal price the buyer pays for the missing units up to the threshold is very low. A dominant firm can use this effect to exclude potential rivals from competition, which is why some jurisdictions consider retroactive discounts as unlawful. This study shows that there in fact is a loyalty enhancing effect of retroactive discounts and how it relates to risk preferences and loss aversion.

Keywords: rebates and discounts; consumer behavior; risk aversion; loss aversion; experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-08-31
New Economics Papers: this item is included in nep-cbe and nep-com
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Related works:
Working Paper: Is there an exclusionary effect of retroactive price reduction schemes? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:knz:dpteco:1321

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