Discounts and Deadlines in Consumer Search

Authors

Dominic Coey
Bradley J. Larsen
Brennan C. Platt, Brigham Young University - UtahFollow

Keywords

Deadlines, Discounts, equilibrium search model, consumers

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 reveal consumers’ reservation prices. We find robust evidence supporting the theory. We quantify dynamic search frictions arising from deadlines and show how, with deadline-constrained buyers, seemingly neutral platform fee increases can cause large market shifts.

Original Publication Citation

“Discounts and Deadlines in Consumer Search,” by Dominic Coey, Bradley Larsen, and Brennan Platt. American Economic Review,110:3748-3785, December 2020.

BYU ScholarsArchive Citation

Coey, Dominic; Larsen, Bradley J.; and Platt, Brennan C., "Discounts and Deadlines in Consumer Search" (2020). Faculty Publications. 5780.
https://scholarsarchive.byu.edu/facpub/5780

Document Type

Peer-Reviewed Article

Publication Date

2020-12

Permanent URL

http://hdl.lib.byu.edu/1877/8510

Publisher

American Economic Review

Language

English

College

Family, Home, and Social Sciences

Department

Economics

University Standing at Time of Publication

Full Professor

Copyright Use Information

https://lib.byu.edu/about/copyright/