A Model of Add-on Pricing

Glenn Ellison ()

No 9721, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines a competitive model of add-on pricing, the practice of advertising low prices for one good in hopes of selling additional products (or a higher quality product) to consumers at a high price at the point of sale. The main conclusion is that add-on pricing softens price competition between firms and results in higher equilibrium profits.

JEL-codes: L13 M30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind
Date: 2003-05
Note: IO
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Related works:
Working Paper: A Model of Add-on Pricing (2004)
Journal Article: A Model of Add-on Pricing (2005)
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