The value of online scarcity signals

Pascal Courty and Sinan Ozel

Information Economics and Policy, 2019, vol. 46, issue C, 23-40

Abstract: Online retailers use scarcity cues to increase sales. Many fear that these pressure tactics are meant to manipulate behavioral biases by creating a sense of urgency. At the same time, scarcity cues could also convey valuable information. We measure the value of the scarcity messages posted by Expedia to a Bayesian rational consumer. A signal reveals information on the number of seats available at the posted price. Consumers can use this information to optimally time when they purchase a ticket. The maximum increase in expected utility for a naive consumer, who does not use publicly available information, is 8%. For a sophisticated consumer, the increase is between 4–7%. Scarcity signals have a negligible impact on seller revenue and consumption.

Keywords: Scarcity; Persuasion; Online recommendations; Price discrimination; Airline ticket (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The Value of Online Scarcity Signals (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:46:y:2019:i:c:p:23-40

DOI: 10.1016/j.infoecopol.2018.12.003

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