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

  • 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.

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Author:Lisa BruttelGND
Parent Title (English):CEPA Discussion Papers
Series (Serial Number):CEPA Discussion Papers (5)
Document Type:Working Paper
Date of first Publication:2019/05/03
Year of Completion:2019
Publishing Institution:Universität Potsdam
Release Date:2019/05/03
Tag:buyer behavior; experiment; loss aversion; rebate and discount; regulation of dominant firms; risk aversion
RVK - Regensburg Classification:QC 010, QC 020, QP 622
Organizational units:Wirtschafts- und Sozialwissenschaftliche Fakultät / Wirtschaftswissenschaften
Zentrale und wissenschaftliche Einrichtungen / Center for Economic Policy Analysis (CEPA)
JEL Classification:C Mathematical and Quantitative Methods / C9 Design of Experiments / C91 Laboratory, Individual Behavior
D Microeconomics / D0 General / D03 Behavioral Economics; Underlying Principles (Updated!)
D Microeconomics / D8 Information, Knowledge, and Uncertainty / D81 Criteria for Decision-Making under Risk and Uncertainty
L Industrial Organization / L4 Antitrust Issues and Policies / L42 Vertical Restraints; Resale Price Maintenance; Quantity Discounts
Peer Review:Nicht referiert