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Search deterrence in experimental consumer goods markets

Alexander Brown (), Ajalavat Viriyavipart () and Xiaoyuan Wang

European Economic Review, 2018, vol. 104, issue C, 167-184

Abstract: In consumer goods markets, theory shows that it is generally profitable for sellers to use search-deterrence strategies to alter buyer search. These results rely on agents’ reacting solely to the economic content of these pressure tactics, ignoring any behaviorally based responses search deterrence may evoke. To test the validity of this assumption, this paper examines an experimental market where profit-maximizing strategy dictates that sellers should exercise one form of search deterrence, exploding offers. Sellers demonstrate a reluctance to use such offers against human buyers, but they are less reluctant to use them against computerized buyers. Human buyers are three times more likely to deviate from optimal strategy by rejecting rather than accepting these offers. Survey responses are consistent with other-regarding-preference-based reasons for sellers’ actions but not buyers’. Taken together, these results suggest the benefits of tactics that rely on pressuring decision-makers may be more nebulous than previously thought.

Keywords: Exploding offer; Search deterrence; Experimental economics; Game theory (search for similar items in EconPapers)
JEL-codes: C91 D21 L10 M31 (search for similar items in EconPapers)
Date: 2018
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