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Discounts and Consumer Search Behavior: The Role of Framing

32 Pages Posted: 28 Sep 2011 Last revised: 31 Oct 2011

Ralph C. Bayer

University of Adelaide

Changxia Ke

Lingnan (University) College, Sun Yat-sen University

Date Written: September 2011

Abstract

We implement a simple two-shop search model in the laboratory with the aim of testing if consumers behave differently in equivalent situations, where prices are displayed either as net prices or as gross prices with discounts. We compare search behavior in base treatments (where both shops post net prices without discounts) to discount treatments (where either the first shop or the second shop posts gross prices with separate discount others). We find that subjects search less in both treatments with discount frames irrespective where the discount is offered. We argue that this bias results from subjects basing their decisions on salient characteristics of the situation rather than on objective price distributions.

Keywords: Consumer Search, Price Framing, Price Discounts, Competition

JEL Classification: D82, D83, C91, L13

Suggested Citation

Bayer, Ralph C. and Ke, Changxia, Discounts and Consumer Search Behavior: The Role of Framing (September 2011). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2011-11. Available at SSRN: https://ssrn.com/abstract=1934762 or http://dx.doi.org/10.2139/ssrn.1934762

Ralph C. Bayer (Contact Author)

University of Adelaide ( email )

No 233 North Terrace, School of Commerce
Adelaide, South Australia 5005
Australia

Changxia Ke

Lingnan (University) College, Sun Yat-sen University ( email )

135 Xingang Xi Road
Guangzhou, Guangdong 510275
China

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