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The role payment depreciation in short temporal separations: Should online retailer make customers wait?

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  • Sharma, Dheeraj
  • Pandey, Shivendra

Abstract

In recent times, it has become common for customers to pre-pay for goods but consume them later. The pain of payment reduces over time, in a phenomenon called payment depreciation (PD). Researchers have examined this phenomenon in situations when payment precedes consumption by long periods, ranging from three weeks to several years. The present study examines the occurrence of payment depreciation when costs precede benefits by short periods, such as three days to two weeks. The three experiments establish the presence of PD in short intervals of less than two weeks. The results are robust for both inventoried and non-inventoried consumption. The results further suggest that the sunk cost of a payment devalues discretely and not continuously. The value of the sunk cost in the consumer's mental account drops significantly after two weeks, as compared to one week. The results fail to demonstrate the effect of payment mode on the payment depreciation phenomenon. Implications indicate that retailers can vary their order delivery period to reduce product returns.

Suggested Citation

  • Sharma, Dheeraj & Pandey, Shivendra, 2020. "The role payment depreciation in short temporal separations: Should online retailer make customers wait?," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:joreco:v:53:y:2020:i:c:s0969698919304473
    DOI: 10.1016/j.jretconser.2019.101965
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    References listed on IDEAS

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    2. Silva, Emmanuel Marques & Moreira, Rafael de Lacerda & Bortolon, Patricia Maria, 2023. "Mental Accounting and decision making: a systematic literature review," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 107(C).

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