Is there an exclusionary effect of retroactive price reduction schemes?

Lisa Bruttel

No 84, TWI Research Paper Series from Thurgauer Wirtschaftsinstitut, Universität Konstanz

Abstract: This paper presents an experiment on the loyalty enhancing effect potentially created by retroactive price reduction schemes. Such price reductions are applied ex post to all units bought in a certain time frame if the total quantity passes a given threshold. Close to the threshold, the marginal price 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 considers whether there in fact is a loyalty enhancing effect of retroactive discounts and shows how it relates to risk preferences and loss aversion.

Keywords: consumer behavior; risk aversion; loss aversion; experiment (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com and nep-exp
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Working Paper: Is there an Exclusionary Effect of Retroactive Price Reduction Schemes? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:twi:respas:0084

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