Discounts and Deadlines in Consumer Search

78 Pages Posted: 1 Mar 2016 Last revised: 21 Mar 2021

See all articles by Dominic Coey

Dominic Coey

eBay Research Labs

Bradley Larsen

Stanford University - Department of Economics; National Bureau of Economic Research (NBER); eBay Research Labs

Brennan C Platt

Brigham Young University - Department of Economics

Date Written: February 2016

Abstract

We present a new equilibrium search model where consumers initially search among discount opportunities, but are willing to pay more as a deadline approaches, eventually turning to full-price sellers. The model predicts equilibrium price dispersion and rationalizes discount and full-price sellers coexisting without relying on ex-ante heterogeneity. We apply the model to online retail sales via auctions and posted prices, where failed attempts to purchase a good reveal consumers' reservation prices. We find robust evidence supporting the theory, and demonstrate that ignoring buyer deadlines can distort estimates of market welfare, consumer demand, and underlying causes of market shifts.

Suggested Citation

Coey, Dominic and Larsen, Bradley and Platt, Brennan C, Discounts and Deadlines in Consumer Search (February 2016). NBER Working Paper No. w22038, Available at SSRN: https://ssrn.com/abstract=2739563

Dominic Coey (Contact Author)

eBay Research Labs ( email )

Bradley Larsen

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

HOME PAGE: http://www.stanford.edu/~bjlarsen/research.html

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Brennan C Platt

Brigham Young University - Department of Economics ( email )

130 Faculty Office Bldg.
Provo, UT 84602-2363
United States
801-422-8904 (Phone)

HOME PAGE: http://econ.byu.edu

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