When retailing and Las Vegas meet: probabilistic free price promotions
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Published version
Date
2017-01
Authors
Mazar, Nina
Shampanier, Kristina
Ariely, Dan
Version
OA Version
Published version
Citation
Nina Mazar, Kristina Shampanier, Dan Ariely. 2017. "When Retailing and Las Vegas Meet: Probabilistic Free Price Promotions." Management Science, Volume 63, Issue 1, pp. 250 - 266 (17). https://doi.org/10.1287/mnsc.2015.2328
Abstract
A number of retailers offer gambling- or lottery-type price promotions with a chance to receive one’s entire purchase for free. Although these retailers seem to share the intuition that probabilistic free price promotions are attractive to consumers, it is unclear how they compare to traditional sure price promotions of equal expected monetary value. We compared these two risky and sure price promotions for planned purchases across six experiments in the field and in the laboratory. Together, we found that consumers are not only more likely to purchase a product promoted with a probabilistic free discount over the same product promoted with a sure discount but that they are also likely to purchase more of it. This preference seems to be primarily due to a diminishing sensitivity to the prices. In addition, we find that the zero price effect, transaction cost, and novelty considerations are likely not implicated.
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License
Attribution-NonCommercial-NoDerivatives 4.0 International