Tag Archives: Prospect Theory

When Retailing and Las Vegas Meet: Probabilistic Free Price Promotions

My co-authors Kristina Shampanier, Dan Ariely, and I, published a research article in Management Science (2017) on the attraction of lottery-type of price promotions.

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.


Best Paper Award IJRM: Paying Too Much Today and Being Satisfied Tomorrow

Our paper “Advance Payment Systems: Paying Too Much Today and Being Satisfied Tomorrow” (co-authored with Christian Schlereth, Fabian Schultz, and Bernd Skiera)  was selected as a winner of the BestPaper Award of IJRM‘s 2015 Special Issue on Marketing and Innovation!

Thank you to The Erasmus Center for Marketing of Innovations of Erasmus University Rotterdam, the American Marketing Association and the European Marketing Academy (EMAC). It was a pleasure to receive the plague at this year’s EMAC conference. 

The  paper can be found here: http://ssrn.com/abstract=2575159