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Discounts and Deadlines in Consumer Search

Dominic Coey, Bradley Larsen () and Brennan Platt

No 22038, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a new equilibrium search model where consumers initially search among discount opportunities, but are willing to pay more as a deadline approaches, eventually turning to full-price sellers. The model predicts equilibrium price dispersion and rationalizes discount and full-price sellers coexisting without relying on ex-ante heterogeneity. We apply the model to online retail sales via auctions and posted prices, where failed attempts to purchase a good reveal consumers' reservation prices. We find robust evidence supporting the theory, and demonstrate that ignoring buyer deadlines can distort estimates of market welfare, consumer demand, and underlying causes of market shifts.

JEL-codes: C73 D44 D83 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
Note: IO TWP
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Published as Dominic Coey & Bradley J. Larsen & Brennan C. Platt, 2020. "Discounts and Deadlines in Consumer Search," American Economic Review, American Economic Association, vol. 110(12), pages 3748-3785, December.

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