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A model of price promotions with consumer search

Banks, Jeffrey and Moorthy, Sridhar (1999) A model of price promotions with consumer search. International Journal of Industrial Organization, 17 (3). pp. 371-398. ISSN 0167-7187. doi:10.1016/S0167-7187(97)00033-7.

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This paper presents a price discrimination model of price promotions. The distinguishing feature of our model is the explicit distinction between regular and promotional prices: Regular prices are chosen first, then promotional prices. Further, while regular prices are always available to everyone, promotional prices are only available when offered, and only to those who search for them. We show that even a monopolist will offer random promotions under these circumstances. Furthermore, as search costs increase, the frequency and depth of promotions increase. With competition for the promotion-oriented consumers, the seller becomes more aggressive in his promotional policies, even more so as search costs increase. The high reservation price consumers, however, end up worse off with competition.

Item Type:Article
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Additional Information:© 1999 Elsevier Science B.V. Accepted 6 June 1997, Available online 29 December 1998.
Subject Keywords:Price discrimination; search; promotions; coupons
Issue or Number:3
Classification Code:JEL classification: D43; D83
Record Number:CaltechAUTHORS:20160525-141323813
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Official Citation:Jeffrey Banks, Sridhar Moorthy, A model of price promotions with consumer search, International Journal of Industrial Organization, Volume 17, Issue 3, 1 April 1999, Pages 371-398, ISSN 0167-7187, (
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:67358
Deposited By: Ruth Sustaita
Deposited On:26 May 2016 20:45
Last Modified:11 Nov 2021 00:31

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