Are Consumers Fooled by Discounts? An Experimental Test in a Consumer Search Environment

Ralph-C Bayer () and Changxia Ke
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Changxia Ke: Max Planck Institute

No 2010-22, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: In this paper we investigate experimentally if people search optimally and how price promotions influence search behavior. We implement a sequential search task with exogenous price dispersion in a baseline treatment and introduce discounts in two experimental treatments. We find that search behavior is roughly consistent with optimal search but also observe some discount biases. If subjects don't know in advance where discounts are offered the purchase probability is increased by 19 percentage points in shops with discounts, even after controlling for the benefit of the discount and for risk preferenhttps://media.adelaide.edu.au/economics/nts are given then the bias is only weakly significant and much smaller (7 percentage points).

Keywords: Consumer Search Theory; Search Cost; Price Promotion (search for similar items in EconPapers)
JEL-codes: C91 D82 D83 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2010
New Economics Papers: this item is included in nep-exp and nep-mkt
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Journal Article: Are Consumers Fooled by Discounts? An Experimental Test in a Consumer Search Environment (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2010-22

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