Selling substitute goods to loss-averse consumers: limited availability, bargains, and rip-offs

Rosato, A

Selling substitute goods to loss-averse consumers: limited availability, bargains, and rip-offs

Rosato, A

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Publication Type:: Journal Article
Citation:: RAND Journal of Economics, 2016, 47 (3), pp. 709 - 733
Issue Date:: 2016-09-01

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Field	Value	Language
dc.contributor.author	Rosato, A https://orcid.org/0000-0003-1789-0225	en_US
dc.date.issued	2016-09-01	en_US
dc.identifier.citation	RAND Journal of Economics, 2016, 47 (3), pp. 709 - 733	en_US
dc.identifier.issn	0741-6261	en_US
dc.identifier.uri	http://hdl.handle.net/10453/121923
dc.description.abstract	© 2016, The RAND Corporation. This article derives the optimal pricing and product-availability strategies for a retailer selling two substitute goods to loss-averse consumers and shows that limited-availability sales manipulate consumers into an ex ante unfavorable purchase. The seller maximizes profits by raising the consumers' reference point through a tempting discount on a good available only in limited supply (the bargain), and cashing in with a high price on the other (the rip-off), which consumers buy if the bargain is not available to reduce their disappointment. The seller might prefer to offer a deal on the more valuable product, using it as a bait.	en_US
dc.relation.ispartof	RAND Journal of Economics	en_US
dc.relation.isbasedon	10.1111/1756-2171.12139	en_US
dc.subject.classification	Economics	en_US
dc.title	Selling substitute goods to loss-averse consumers: limited availability, bargains, and rip-offs	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	47	en_US
utslib.for	140104 Microeconomic Theory	en_US
utslib.for	14 Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	open_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	47	en_US

Abstract:

© 2016, The RAND Corporation. This article derives the optimal pricing and product-availability strategies for a retailer selling two substitute goods to loss-averse consumers and shows that limited-availability sales manipulate consumers into an ex ante unfavorable purchase. The seller maximizes profits by raising the consumers' reference point through a tempting discount on a good available only in limited supply (the bargain), and cashing in with a high price on the other (the rip-off), which consumers buy if the bargain is not available to reduce their disappointment. The seller might prefer to offer a deal on the more valuable product, using it as a bait.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/121923