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Review of Industrial Organization

, Volume 54, Issue 3, pp 575–593 | Cite as

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

  • Lisa BruttelEmail author
Article
  • 52 Downloads

Abstract

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.

Keywords

Buyer behavior Experiment Loss aversion Rebate and discount Regulation of dominant firms Risk aversion 

Notes

Acknowledgements

I would like to thank Marco Caliendo, Dirk Engelmann, Miguel Fonseca, Jochen Gloeckner, participants of TIBER XII in Tilburg, the ESA European meeting in Heidelberg, the GfeW meeting in Kassel, and of research seminars in Bonn and Kreuzlingen for very helpful suggestions. Alexandra Haas and Jana Hamdan provided highly valuable research assistance.

Supplementary material

11151_2018_9653_MOESM1_ESM.txt (2.5 mb)
Supplementary material 1 (txt 2532 KB)
11151_2018_9653_MOESM2_ESM.do (11 kb)
Supplementary material 2 (do 11 KB)

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of Economics and Social SciencesUniversity of PotsdamPotsdamGermany

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