Take it or leave it: Experimental evidence on the effect of time-limited offers on consumer behaviour

Robert Sugden, Mengjie Wang and Daniel Zizzo

Journal of Economic Behavior & Organization, 2019, vol. 168, issue C, 1-23

Abstract: Making time-limited offers is a common retail pricing strategy. Economic theory implies that such offers inhibit price search, making markets less competitive. We investigate experimentally whether this effect is intensified by behavioural factors – specifically, feedback-conditional regret, reduced decision quality due to time constraints, and aversion to small-scale risk. Participants choose from a sequence of alternative price offers, one of which might be time-limited, under various conditions. These price search problems were matched with equivalent, time-unconstrained binary choices between lotteries. We find no evidence of regret effects. Surprisingly, time-limited offers are more likely to be chosen when the time available for decision-making is longer. Overall, individuals show aversion to small-scale risk; this is stronger in price search than lottery choice. Allowing for this, choices in the two types of task tend to be mutually consistent at the individual level, even when decision-making is subject to tight time constraints.

Keywords: Time-limited offers; Time constraints; Consumer search; Consumer choice (search for similar items in EconPapers)
JEL-codes: C91 D83 D91 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: Take it or leave it: Experimental evidence on the effect of time-limited offers on consumer behaviour (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:168:y:2019:i:c:p:1-23

DOI: 10.1016/j.jebo.2019.09.008

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