Exploding Offers and Buy-Now Discounts

Mark Armstrong and Jidong Zhou ()

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: A common sales tactic is for a seller to encourage a potential customer to make her purchase decision quickly. We consider a market with sequential consumer search in which firms often encourage first-time visitors to buy immediately, either by making an “exploding offer” (which permits no return once the consumer leaves) or by offering a “buy-now discount” (which makes the price paid for immediate purchase lower than the regular price). Prices often increase when these policies are used. If firms cannot commit to their sales policy, the outcome depends on whether consumer incur an intrinsic cost of returning to a firm: if there is no such return cost, it is often an equilibrium for firms to offer a uniform price to both first-time and returning visitors; if the return cost is positive, however, firms are forced to make exploding offers.

Keywords: Consumer search; oligopoly; price discrimination; high-pressure selling; exploding offers; buy-now discounts; costly recall. (search for similar items in EconPapers)
JEL-codes: D40 D43 D83 (search for similar items in EconPapers)
Date: 2010-10-24
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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http://www.eeri.eu/documents/wp/EERI_RP_2010_44.pdf (application/pdf)

Related works:
Working Paper: Exploding Offers and Buy-Now Discounts (2011)
Working Paper: Exploding offers and buy-now discounts (2010)
Working Paper: Exploding offers and buy-now discounts (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eei:rpaper:eeri_rp_2010_44

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