Price Salience and Product Choice

38 Pages Posted: 22 Oct 2018 Last revised: 27 Apr 2022

See all articles by Thomas Blake

Thomas Blake

eBay Research Labs

Sarah Moshary

University of Chicago - Booth School of Business

Kane Sweeney

eBay Research Labs

Steven Tadelis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: October 2018

Abstract

We study the effect of price salience on whether a product is purchased and, conditional on purchase, the quality purchased. Consistent with our theoretical predictions, we find that making the full purchase price salient to consumers reduces both the quality and quantity of goods purchased. The effect of salience on quality accounts for at least 28% of the overall revenue decline. Evidence shows that the effects persist beyond the first purchase and impact even experienced users. Detailed click-stream data shows that price-obfuscation makes price comparisons difficult and results in consumers spending more than they otherwise would. We also find that sellers respond to the increased price obfuscation by listing higher quality tickets.

Suggested Citation

Blake, Thomas and Moshary, Sarah and Sweeney, Kane and Tadelis, Steven, Price Salience and Product Choice (October 2018). NBER Working Paper No. w25186, Available at SSRN: https://ssrn.com/abstract=3270766

Thomas Blake (Contact Author)

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Sarah Moshary

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Kane Sweeney

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Steven Tadelis

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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