Misleading sales in salience markets

Dongwoo Lee

Applied Economics Letters, 2022, vol. 29, issue 2, 159-166

Abstract: This paper studies misleading sales by the low-quality firm who competes against the high-quality firm. Misleading sales intentionally make consumers (mis-)believe that the current price is a limited-time discount price. It generates a decoy for the low-quality product that inflates the reference price in consumers’ minds. We show that the low-quality firm can benefit by offering aggressive discount rates when consumers are salient thinkers who place a higher weight on a standing-out attribute.

Date: 2022
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DOI: 10.1080/13504851.2020.1861188

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