Plausible versus implausible tensile price claim: Selective accessibility model approach

Retailers frequently use exaggerated price discount advertisements with a tensile price claim (TPC; e.g., “Save up to 70%”) to attract consumers because they expect that once consumers enter a store, they will purchase low‐ or medium‐discounted products. Drawing on the selective accessibility model, this study investigated the way in which an implausibly high maximum level of savings stated in a TPC influences consumers’ expected price discount (EPD) and perceptions of actual price discounts across different types of TPCs (i.e., TPC stating a maximum level and TPC stating a range of savings). This study also investigated two situations in which consumers have previous knowledge of a product’s price discount versus when they have less or no knowledge of the discount. For both conditions, a single‐anchor TPC (i.e., “Save up to Y%”) that stated an implausible maximum level of savings led to a higher EPD and lower perceptions of the deal (i.e., perceived savings, price fairness, and perceived value) with respect to the actual price discount than did a TPC with a plausible maximum level of savings. In contrast, when the TPC stated two anchors (i.e., “Save X–Y%”) and consumers had knowledge of the price discount, their EPDs assimilated only toward the plausible anchor (X), and ignored the implausibly high maximum price discount (Y), resulting in a lower EPD and higher perceptions of the deal of the actual price discounts than a TPC that stated a plausibly high maximum level of savings. In contrast, when consumers had no knowledge of the price discount, their EPDs only adjusted toward the more plausible anchor (X), regardless of whether they perceived the maximum anchor as plausible or implausible. Thus, there was no difference in consumers’ perceptions of “Save X–Y%” between implausibly and plausibly high Y%.     

Consumer Perceptions of Precise vs. Just-Below Prices in Retail Settings

Consumer perceptions of the effectiveness of precise prices in communicating good value are compared to that of just-below prices in a retail context. Two studies demonstrate that a retailer employing a precise pricing strategy is seen as offering lower prices relative to one using just-below prices. The likelihood of consumers going to a competitor in hope of finding a better deal was also lower with precise compared to just-below prices. However, this precision effect disappeared when two prices—an original and a discount one—were displayed as part of a promotional discount.     

When do amount-off discounts result in more positive consumer responses? Meta-analytic evidence

Extant research has examined the effects of amount-off discounts on consumer responses, but the empirical findings are inconsistent. This study presents a meta-analysis of 19 studies and 86 effect sizes (N = 12,003) calibrating the effects of discount frames on consumer responses. Amount-off discounts are found to lead to positive consumer responses through positive changes in attitudes. Analyzing various moderators’ impacts shows that amount-off discounts have different effects depending on the product price level, the product type, and the price promotion mode. For instance, amount-off discounts tend to be more effective than percentage-off discounts when the price is high, when the product type is material, and when the price promotion mode is a discount.     

SOCIAL DISCOUNTING AND THE LONG RATE OF INTEREST

The well‐known theorem of Dybvig, Ingersoll, and Ross shows that the long zero‐coupon rate can never fall. This result, which, although undoubtedly correct, has been regarded by many as surprising, stems from the implicit assumption that the long‐term discount function has an exponential tail. We revisit the problem in the setting of modern interest rate theory, and show that if the long “simple” interest rate (or Libor rate) is finite, then this rate (unlike the zero‐coupon rate) acts viably as a state variable, the value of which can fluctuate randomly in line with other economic indicators. New interest rate models are constructed, under this hypothesis and certain generalizations thereof, that illustrate explicitly the good asymptotic behavior of the resulting discount bond systems. The conditions necessary for the existence of such “hyperbolic” and “generalized hyperbolic” long rates are those of so‐called social discounting, which allow for long‐term cash flows to be treated as broadly “just as important” as those of the short or medium term. As a consequence, we are able to provide a consistent arbitrage‐free valuation framework for the cost‐benefit analysis and risk management of long‐term social projects, such as those associated with sustainable energy, resource conservation, and climate change.     

Consumers' perceptions of promotional framing of price

This article focuses on consumer perceptions of transaction value when presented with deals that are equivalent on a unit‐cost basis but worded differently. Through an experimental design setting, it examines the effect of three such frames: one, stated in terms of a straight price promotion (“50% off”), the second, as an extra‐product or volume promotion (“buy one, get one free”), and a third as a “mixed” promotion (“buy two, get 50% off”). Four typical supermarket categories are considered which permit the investigation of the effect of two category‐based moderating factors: stock‐up characteristic and price level. Results show that the nature of framing appears to differentially affect consumer perceptions of value from “equivalent” deals. Also, perceptions of deal value from price versus extra‐product promotions are moderated by the stock‐up characteristic of the category. However, consumers' internal reference prices remain unaffected across one‐time price and extra‐product promotions. These findings provide some understanding of the role of deal framing on consumers' responses, and offer implications for industry practitioners interested in communicating the maximum value in their deals. © 2000 John Wiley & Sons, Inc.     

The effect of specific discount pattern in terms of price promotions on perceived price attractiveness and purchase intention: An experimental research

This study aims to investigate consumer perceptions and reactions in terms of specific discount patterns (fixed price, 40% discount, discount from 500 TL to 300 TL and 20% + 25% discount) in price promotion. According to the results, specific discount patterns in price promotion have a significant effect on perceived price attractiveness and purchase intention. When the specific discount patterns in price promotion and gender interaction were analyzed in terms of perceived price attractiveness, the scenario of the “discount from TL 500 to TL 300” significantly differentiated from both the control scenario (fixed price) and experimental scenarios for female. For males, no significant difference was found between the control and experimental scenarios. In terms of purchase intention, a significant difference was found between the fixed price scenario and the discount scenario from 500 TL to 300 TL and between the fixed price and 20% + 25% discount scenario. The theoretical managerial implications of the study were discussed, and future research suggestions were presented.     

A comparison of two types of price discounts in shifting consumers' attitudes and purchase intentions

This study focuses on consumer responses to two different types of price discounts: 1) a price discount with and 2) a price discount without a minimum purchase requirement. The effects of the discounts are examined to the extent that they may change consumers' attitudes and purchase intentions regarding a particular brand, by moving it from consumers' hold set to consideration set. A three-phase study on fast-food services in China was conducted. The results of the study provide new empirical insights regarding how to use a brand categorization model to predict the effects of different types of price discounts on consumer purchase behavior. More specifically, this study demonstrates that when a price discount with and without a minimum purchase requirement is applied to a brand in a hold set, the brand moves from the consumers' hold set to the consideration set. However, the effects of the two types of price discounts on consumers' attitudes and purchase intentions are not significantly different. The results are discussed in relation to brand management and marketing strategies in consumer goods industries.     

The effect of permanent product discounts and order coupons on purchase incidence,purchase quantity,and spending

This paper examines the influence of a permanent discount strategy on customer purchase behavior, i.e., purchase incidence in each week, purchase quantity (in units), and total order spending (in CNY). Permanent discounts are defined as discounts continuously provided by retailers. We identify two types of permanent discounts, namely, product-specific price discounts (PD) and order coupons (OD, which can be redeemed for a total order). We collect transactional data from a Chinese online retailer and empirically examine the effects of the two types of permanent discounts and customers’ expectations of PD and OD. We find nonlinear relationships between permanent discounts and customer purchase behavior. PDs negatively influence spending when they are lower than 19% but show a positive effect beyond this threshold, hence depicting a U-shaped relationship. They also affect purchase quantity positively but at a decreasing rate. Customer expectations of PD influence purchase incidence, spending, and purchase quantity following a U-shaped patter with a positive influence appearing when PD expectations are high than 31%, 27%, and 18% respectively. On the other hand, ODs influence spending and purchase quantity positively at an increasing rate. Customer expectations of OD influence purchase incidence, spending, and purchase quantity following a U-shaped relationship where the positive influence on purchase incidence shows beyond OD expectations of 426 CNY, and the positive effect appearing on spending and purchase quantity when these expectations are higher than 34 CNY. We also find that customer expectations of discounts interact with current discount levels in their influence on spending. Combining these results and considering that order coupons negatively affect the profit margin of the total basket, we suggest that retailers should offer order coupons with relatively low value but product-specific price discounts with high discount depth.     

Integrating partitioned prices via computational estimation

This paper introduces computational estimation to the literature on consumers’ numerical cognition. Computational estimation involves simplifying an arithmetic problem via mathematical procedures to produce an approximate answer. Employing calculation knowledge and approximation together, consumers are likely to use computational estimation as it is relatively accurate while saving cognitive effort compared to calculating values. Three studies applied to partitioned prices in the form of a base price and a percentage discount, demonstrate that when faced with this numeric integration task, the strategy consumers undertake is dependent on the characteristics of the numerals with discounts that are round or close to round being associated with greater use of computational estimation. Further, when employing computational estimation, consumers arrive at more accurate, and lower, price estimates in which they place more confidence than when using alternative an integration strategy. As a result, discounts that are near a round value are preferred to those that are not; a result that is dependent upon the use of computational estimation.     

To Whom,When, and How Much to Discount? A Constrained Optimization of Customized Temporal Discounts

Customized temporal discounts are price cuts or coupons that are tailored by size, timing, and household to maximize profits to a retailer or manufacturer. The authors show how such discounts allow companies to optimize to whom, when, and how much to discount. Such a scheme allows firms to send just enough discounts just prior to the individual's purchase of a rival brand. To do so, the authors model household purchase timing and brand choice in response to discounts and use Bayesian estimation to obtain individual household parameters. They illustrate the model on a Japanese data set having price cuts, a US data set having coupons, and another US data set having discounts. They formulate the optimization task of customized temporal coupons as a constrained multiple-knapsack problem under a given budget. They use simulations of the empirical contexts to obtain optimal solutions and to assess improvement in profits relative to existing practice and alternate models in the literature. The proposed model yields increase in profits of 18–40 percent relative to a standard model that optimizes the value but not timing of discounts.     

The use and abuse of executive powers in warding off corporate raiders

As corporate raids become more prevalent, top corporate executives have asked for and often received additional executive power to ward off raiders or “sharks”. For example, they have been given the use of “shark repellents” such as staggered elections for board members, cumulative voting, super majority voting requirements, and the power to sell off the firm's “crown jewels”. Are they abusing these powers as they attempt to save their jobs, at the expense of stockholders, by driving off the corporate raiders who might unseat ineffective management? In this article the practices being used by entrenched managers to make their firms less attractive to raiders and the defense tactics they are using in corporate takeover battles are examined from an ethical viewpoint.     

Toward a Common Good Theory of the Firm: The Tasubinsa Case

Tasubinsa is a “Special Employment and Occupational Center” constituted in accordance with Spanish Law where 90% of the workers have mental, sensorial or physical impairments of at least 30%. Its positive experience of more than 15 years provides entirely different responses from mainstream neoclassical theory (transaction cost theory, agency theory, and shareholder theory) to basic questions such as “What is a firm?”, “What is its purpose?”, “Who owns a firm?”, and “What do a firm’s owners seek?”. The article discusses how these different premises give rise to a distinctive corporate culture centered on the handicapped person.     

The role of attributions in consumer perceptions of retail advertisements promoting price discounts

This study examines whether information in an advertisement promoting a price discount is capable of affecting attributions made about the price reduction and whether these attributions, in turn, affect consumer perceptions and evaluations of the sale. Findings show that price image of the retail advertiser had a strong effect on attributions pertaining to the merchant and a marginal effect on product attributions. The attribution variables, in turn, explained significant amounts of variance in criterion variables measuring consumer perceptions of value, attitude toward the ad, and shopping intentions, beyond the variance explained by the store and discount claim variables manipulated in the study. These results suggest the importance of the role of attributions made by consumers when exposed to ads promoting discounts.     

A “Pure” long-term interest rate and the demand for money

This article presents the appropriate rate by which to discount a constant, certain, infinite stream of future payments: that is, the yield on a noncallable perpetuity or consol. The American consol series is a daily risk-free “pure” long term interest rate which is undistorted by tax effects, call premiums, and varying duration and reinvestment assumptions. If Hamburger had used the American consol series instead of the U.S. Government Long Term Bond Rate in his money demand function, he would have found more of the “missing money.” His average error (actual minus predicted money demand) as a percentage of actual money demand would have been reduced from 1.43% to 0.93% a 35% error reduction.     

Brand choice and deep price discounts

Whenever price is presented in a discount format it can perform an informative role in brand choice. This article postulates the occurrence of an “attribution” process to account for the possibility that a very deep price discount produces a decrease in the desirability of the discounted brand under choice conditions involving unfamiliar brands and/or discount store (as opposed to department store). Hypotheses derived from the theoretical analysis are tested in a laboratory experiment. The results of the study support the proposition that the desirability of a discounted unfamiliar brand does not continue to increase as the size of the price discount increases. Predictions concerning the effects of store type and size of price discount were not confirmed. The article concludes with a brief discussion of the implications for marketing management.     

The dark side of multiunit discounts: Multiunit discounts reduce rest of basket revenue

Multiunit discounts refer to the practice of offering a discount on purchase of multiple units of a product. An example of multiunit discounts, which are commonly used by retailers, is ‘3 for $10’. While past research suggests that multiunit discounts generate higher sales than per-unit discounts, there is no research on how such discounts affect sales of other products in the store. We argue that consumers exposed to multiunit discounts may purchase the products offered as such to benefit from the deal. These customers, however, will spend less on other products, resulting in lower revenue from the rest of the basket during the shopping trip. Based on theoretical insights, we propose why such an effect could occur and test our arguments using store data and a lab experiment. The findings of this research suggest that multiunit discounts have a multifaceted impact on consumer decision-making. We also discuss the theoretical, managerial, and methodological contributions of this research.     

Discount development in france: The introduction of the format and the competitive response

This article aims to set forth and clarify the factors that caused the rapid development of the hard discount business in France over the past 2 years and to highlight their key impacts. The hard discount business is supposed to have triggered an “intratype” competitive reaction by many French companies which diversified their businesses into this segment, as well as an “intertype” set of reactions by both supermarkets and hypermarkets which implemented the new strategies described in this article based on either cost‐cutting policies and/or trade names differentiation. Conclusions may be drawn following an analysis of the features of this formula as well as the consumers' and competitors' responses. One conclusion may be that the discounters are also bound to increase their market share further once the economic crisis is over. In fact, this business meets the on‐going purchasing and shopping needs by most of the consumers.     

Toward A Convergence Theory For Continuous Stochastic Securities Market Models1

This article reviews some recently developed approximation schemes for financial markets with continuous trading. Two methods for approximating continuous-time stochastic securities market models whose exogenously given prices have continuous sample paths are described and compared One method approximates both the paths and the information structure; the other is an approximation in distribution with a Markovian structure. In both cases, the approximating models have a finite state space, discrete time, and possess the same “structural” properties (e.g., “no arbitrage” and “completeness”) as the continuous model. the latter characteristic is an important criterion for judging the merits of the approximations. Taking advantage of the “structure-preserving” characteristic, one can formulate a convergence theory for frictionless markets with continuous trading. the theory provides convergence results for objects such as contingent claim prices, replicating portfolio strategies (hedging policies), optimal consumption policies, and cumulative financial gains (i.e., stochastic integrals), which are constructed along the approximation. the convergence theory enables one to combine the intuitive appeal of discrete models and the analytic tractability of continuous models to provide new insight into the theory of modern financial markets. We survey the current state of such a convergence theory and illustrate the results with some examples of well-known continuous securities market models.     

Computer networking among executives: A case study

Group Support Systems may be “distributed”; for nonsimultaneous use by being embedded in a Computer‐Mediated Communication System (CMCS). In this manner, large groups may use them for complex tasks over an extended period of time. Will executives use such systems, and what are their reactions? This case study of elites engaged in formulating recommendations for the White House Conference on Productivity demonstrates that executives can use such systems, given that “critical success factors”; are met. Perceived information richness is strongly correlated with perceptions of productivity enhancement as a result of system use.