Fictitious Pricing in Retail
نویسنده
چکیده
Prices in a wide variety of contexts come in three parts: an “original” or “suggested” price, a discount off that price, and the final price. Little empirical evidence is available that speaks to how each pricing component affects purchase behavior, even as theories abound. This paper outlines the main theories of fictitious pricing with their corresponding predictions and examines their relevance empirically. It exploits retail transactions data that features large variations in these pricing components together with a relatively homogeneous product space. The results have important implications for how managers should set each pricing component to maximize profits.
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