Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5077918 | International Journal of Industrial Organization | 2016 | 16 Pages |
Abstract
The assumption that consumers are fully rational and hold correct price expectations is demanding in dynamic settings. We claim that it is testable provided that market-level data on prices and purchases are available. We find that consumers hold simple expectations regarding the timing of promotions for music albums: consumers act as if they were aware of reductions but did not revise their beliefs over time. The anticipation effect, due to strategically delaying purchase, amounts to 1/5 of the decision to purchase during regular periods. These results have implications in terms of demand estimation, optimal pricing and welfare computations.
Related Topics
Social Sciences and Humanities
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Economics and Econometrics
Authors
Philippe Février, Lionel Wilner,