Do consumers correctly expect price reductions? Testing dynamic behavior

• Autores: Philippe Février, Lionel Wilner
• Localización: International journal of industrial organization, ISSN 0167-7187, Vol. 44, Nº. 0, 2016, págs. 25-40
• Idioma: inglés
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• Resumen

  • The assumption that consumers are fully rational and hold correct price expectations is demanding in dynamic settings. We claim that it is testable provided that market-level data on prices and purchases are available. We find that consumers hold simple expectations regarding the timing of promotions for music albums: consumers act as if they were aware of reductions but did not revise their beliefs over time. The anticipation effect, due to strategically delaying purchase, amounts to 1/5 of the decision to purchase during regular periods. These results have implications in terms of demand estimation, optimal pricing and welfare computations.