Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142605
Authors: 
Armstrong, Mark
Zhou, Jidong
Year of Publication: 
2010
Series/Report no.: 
EERI Research Paper Series 44/2010
Abstract: 
A common sales tactic is for a seller to encourage a potential customer to make her purchase decision quickly. We consider a market with sequential consumer search in which firms often encourage first-time visitors to buy immediately, either by making an “exploding offer” (which permits no return once the consumer leaves) or by offering a “buy-now discount” (which makes the price paid for immediate purchase lower than the regular price). Prices often increase when these policies are used. If firms cannot commit to their sales policy, the outcome depends on whether consumer incur an intrinsic cost of returning to a firm: if there is no such return cost, it is often an equilibrium for firms to offer a uniform price to both first-time and returning visitors; if the return cost is positive, however, firms are forced to make exploding offers.
Subjects: 
Consumer search
oligopoly
price discrimination
high-pressure selling
exploding offers
buy-now discounts
costly recall
JEL: 
D40
D43
D83
Document Type: 
Working Paper

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