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Loss aversion in post-sale purchases of two close substitutes

Author

Listed:
  • Zhu, Jialiang
  • Wang, Zeyu

Abstract

This paper employs micro-level data to identify consumers’ loss aversion when choosing between two products that share the same price and observable product characteristics. The analysis focuses on post-sale observations where one product experienced a sale (a discounted price), but the price of the other product did not change. The paper contributes to the literature by demonstrating that a product benefits when its close competitor’s sale is over. A loss-averse consumer would switch to the close substitute even when both products share the same price.

Suggested Citation

  • Zhu, Jialiang & Wang, Zeyu, 2022. "Loss aversion in post-sale purchases of two close substitutes," Economics Letters, Elsevier, vol. 218(C).
    • Handle: RePEc:eee:ecolet:v:218:y:2022:i:c:s0165176522002671
    DOI: 10.1016/j.econlet.2022.110752
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    References listed on IDEAS

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    1. Igal Hendel & Aviv Nevo, 2006. "Sales and consumer inventory," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 543-561, September.
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    More about this item

    Keywords

    Loss aversion; Post-sale purchases; Close substitutes;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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