When retailing and las vegas meet: Probabilistic free price promotions

Published

Journal Article

© 2017 INFORMS. 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.

Full Text

Duke Authors

Cited Authors

  • Mazar, N; Shampanier, K; Ariely, D

Published Date

  • January 1, 2017

Published In

Volume / Issue

  • 63 / 1

Start / End Page

  • 250 - 266

Electronic International Standard Serial Number (EISSN)

  • 1526-5501

International Standard Serial Number (ISSN)

  • 0025-1909

Digital Object Identifier (DOI)

  • 10.1287/mnsc.2015.2328

Citation Source

  • Scopus