We implement a simple two-shop search model in the laboratory with the aim to investigate if consumers behave differently in equivalent situations, where prices are displayed either as net prices or as gross prices with discounts. We compare treatments, where we either depict the known price of the first shop or the initially uncertain price of the second shop as a gross price with a discount, with treatments without discounts. We find that subjects search less in both treatments with discounts. Hence, we conclude that retailers can use this framing effect in order to reduce the competitiveness in their market, since decreased search intensities dampen competitive pressure.
Source: “Discounts and Consumer Search Behavior: The Role of Framing” from The University of Adelaide School of Economics, Research Paper No. 2010-21, October 2010
For more on the subject of choice check out The Paradox of Choice and How We Decide.
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How can you make someone think they’re getting a discount when they aren’t?
