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Take it or leave it: experimental evidence on the effect of time-limited offers on consumer behaviour

Sugden, Robert, Wang, Mengjie and Zizzo, Daniel John 2019. Take it or leave it: experimental evidence on the effect of time-limited offers on consumer behaviour. Journal of Economic Behavior and Organization 168 , pp. 1-23. 10.1016/j.jebo.2019.09.008

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Making time-limited offers is a common retail pricing strategy. Economic theory implies that such offers inhibit price search, making markets less competitive. We investigate experimentally whether this effect is intensified by behavioural factors – specifically, feedback-conditional regret, reduced decision quality due to time constraints, and aversion to small-scale risk. Participants choose from a sequence of alternative price offers, one of which might be time-limited, under various conditions. These price search problems were matched with equivalent, time-unconstrained binary choices between lotteries. We find no evidence of regret effects. Surprisingly, time-limited offers are more likely to be chosen when the time available for decision-making is longer. Overall, individuals show aversion to small-scale risk; this is stronger in price search than lottery choice. Allowing for this, choices in the two types of task tend to be mutually consistent at the individual level, even when decision-making is subject to tight time constraints.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0167-2681
Date of First Compliant Deposit: 25 January 2022
Date of Acceptance: 9 September 2019
Last Modified: 10 May 2023 12:33

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