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

Lisa Bruttel ()

No 5, CEPA Discussion Papers from Center for Economic Policy Analysis

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: rebate and discount; buyer behavior; risk aversion; loss aversion; regulation of dominant firms; experiment (search for similar items in EconPapers)
JEL-codes: C91 D03 D81 L42 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-bec, nep-com, nep-exp, nep-ind, nep-ore and nep-upt
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https://doi.org/10.25932/publishup-42768 (application/pdf)

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