Effect of price-discount distribution in multi-unit price promotions on consumers' willingness to pay, sales value, and retailers' revenue

Abstract

Using multi-unit auctions, we examined the effect of different distributions of price discount across multiple units of a relatively new product on consumers' Willingness to Pay (WTP), sales value and retailers' revenue. We found that allowing the price discount to be increasing in the number of units increases willingness to pay, sales value and retailers' revenue and that a price discount that is uniformly distributed across units also has the potential to motivate consumers to buy more units of the product. However, multi-unit price promotions that concentrate all the amount of price discount on the last unit only generate a weak positive effect on sales value. [EconLit Citations: C910, D120, M310]. (C) 2014 Wiley Periodicals, Inc.