Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5059141 | Economics Letters | 2014 | 4 Pages |
Abstract
A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing loss-leader theories in that firms make a loss on some consumers (who buy the basic version of the good) and a profit on others (who buy the upgrade).
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Younghwan In, Julian Wright,