Is There a Loyalty-Enhancing Effect of Retroactive Price-Reduction Schemes?

Lisa Bruttel

Review of Industrial Organization, 2019, vol. 54, issue 3, No 5, 575-593

Abstract: Abstract This paper presents an experiment on the effect of retroactive price-reduction schemes on buyers’ repeated purchase decisions. Such schemes promise buyers a reduced price for all units that are bought in a certain time frame if the total quantity that is purchased passes a given threshold. This study finds a loyalty-enhancing effect of retroactive price-reduction schemes only if the buyers ex-ante expected that entering into the scheme would maximize their monetary gain, but later learn that they should leave the scheme. Furthermore, the effect crucially hinges on the framing of the price reduction.

Keywords: Buyer behavior; Experiment; Loss aversion; Rebate and discount; Regulation of dominant firms; Risk aversion (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11151-018-9653-9

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