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  Purchase Decisions with Non-linear Pricing Options under Risk – Experimental Evidence

Maier-Rigaud, F. P., & Beckenkamp, M. (2007). Purchase Decisions with Non-linear Pricing Options under Risk – Experimental Evidence.

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 Creators:
Maier-Rigaud, Frank P.1, Author              
Beckenkamp, Martin1, Author              
Affiliations:
1Max Planck Institute for Research on Collective Goods, Max Planck Society, ou_2173688              

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Free keywords: C91, D81, D40, L42 rebate, discount, linear price, newsvendor problem, stochastic inventory problem, lotteries, risk preferences
 Abstract: <p>We experimentally investigate purchase decisions with linear and nonlinear pricing under risk. The ex-periment is based on a single period stochastic inventory problem with endogenous cost. It extends classic binary lottery experiments to test standard decision theoretic predictions concerning purchasing behavior in a rebate and a discount scheme. We investigate to what extent customers continue to purchase under two mathematically isomorph formats of non-linear schemes even if switching to a linear pricing scheme is optimal. Our results indicate that rebate and discount schemes exert a significant attraction on custom-ers. Given the increased role of non-linear pricing schemes, systematic deviations from optimal behaviour are an important element in the design of such schemes and may raise consumer protection and competi-tion questions. We discuss how our results can be explained by decision heuristics.</p>

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 Dates: 2007
 Publication Status: Published in print
 Pages: 33
 Publishing info: Bonn : Max Planck Institute for Research on Collective Goods
 Table of Contents: -
 Rev. Type: -
 Identifiers: Other: 2007/10
 Degree: -

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