Small probabilistic discounts stimulate spending: Pain of paying in price promotions

Journal Article (Journal Article)

We find that small probabilistic price promotions effectively stimulate demand, even more so than comparable fixed price promotions (e.g., “1% chance it’s free” vs. “1% off,” respectively), because they more effectively reduce the pain of paying. In three field experiments at a grocer, we exogenously and endogenously manipulated the salience of pain of paying via elicitation timing (e.g., at entrance or checkout) and payment method (i.e., cash/debit cards or credit cards). This modulated the attractiveness of probabilistic discounts and their ability to stimulate spending. Shoppers paying with cash or debit cards, for example, spent 54% more if they received a 1% probabilistic discount than a 1% fixed discount (experiment 2). A fourth experiment showed that consumers’ sensitivity to pain of paying modulates the greater comparative efficacy of small probabilistic than fixed discounts. More broadly, the results elucidate a novel affective route through which price promotions stimulate demand-pain of paying.

Full Text

Duke Authors

Cited Authors

  • Lee, CY; Morewedge, CK; Hochman, G; Ariely, D

Published Date

  • April 1, 2019

Published In

Volume / Issue

  • 4 / 2

Start / End Page

  • 160 - 171

Electronic International Standard Serial Number (EISSN)

  • 2378-1823

International Standard Serial Number (ISSN)

  • 2378-1815

Digital Object Identifier (DOI)

  • 10.1086/701901

Citation Source

  • Scopus