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Type: Journal article
Title: Are consumers fooled by discounts? An experimental test in a consumer search environment
Author: Bayer, R.
Ke, C.
Citation: Economic Record, 2011; 87(279):575-586
Publisher: Blackwell Publishing Asia
Issue Date: 2011
ISSN: 0013-0249
Statement of
Ralph-C. Bayer and Changzia Ke
Abstract: In this article, we investigate experimentally whether people search optimally and how price promotions influence search behaviour. 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 behaviour is roughly consistent with optimal search but also observe some discount biases. If subjects do not 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 preferences. If consumers know in advance where discounts are given, then the bias is only weakly significant and much smaller (7 percentage points).
Keywords: C91; D82; D83
Rights: © 2011 The Economic Society of Australia
RMID: 0020114857
DOI: 10.1111/j.1475-4932.2011.00724.x
Appears in Collections:Economics publications

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