Choosing to Be Strategic: Implications of the Endogenous Adoption of Forward-Looking Purchasing Behavior on Multiperiod Pricing

Pricing over multiple periods under forward-looking, strategic consumer purchasing behavior has received significant recent research attention; however, whether consumers actually benefit from this behavior and would voluntarily choose to be strategic has not been previously considered. We explore this question, and show that many consumers have lower surplus if they are strategic than if they are myopic. We then develop a model in which consumers choose to become strategic by exerting costly e↵ort, and show three key implications of this choice. First, it is possible to increase firm profit, consumer welfare, and social welfare simultaneously by increasing the cost of strategic behavior, suggesting firms can, essentially, force consumers to be myopic and make all parties better o↵; this helps explain how firms that do the most to make strategic behavior di cult are able to attract more demand and be successful in the marketplace. Second, e↵orts to mitigate strategic consumer waiting by committing to future prices instead of pricing dynamically may decrease the cost of strategic behavior and backfire, encouraging more consumers to be strategic; hence, in contrast to most previous research, price commitment may yield lower profit than dynamic pricing if consumers can choose to be strategic. And third, considering the consumer choice to be strategic can have a significant qualitative impact on firm and consumer decisions.