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Can Bait and Switch Benefit Consumers?

Author

Listed:
  • Eitan Gerstner

    (North Carolina State University)

  • James D. Hess

    (North Carolina State University)

Abstract

We present a model that leads to an equilibrium with characteristics similar to the following stylized facts observed in retail markets: (a) Retailers advertise only selected brands; (b) Often low priced advertised brands are understocked; (c) In-store promotions are biased towards more expensive substitute brands. Together these practices constitute illegal bait and switch. Is this phenomenon necessarily harmful to consumers and to the economy? We show that bait and switch can benefit consumers because utility is created through in-store promotions and price competition is enhanced. This suggests that the FTC investigate further its ban on bait and switch.

Suggested Citation

  • Eitan Gerstner & James D. Hess, 1990. "Can Bait and Switch Benefit Consumers?," Marketing Science, INFORMS, vol. 9(2), pages 114-124.
    • Handle: RePEc:inm:ormksc:v:9:y:1990:i:2:p:114-124
    DOI: 10.1287/mksc.9.2.114
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    Citations

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    Cited by:

    1. Arno Apffelstaedt & Lydia Mechtenberg, 2021. "Competition for Context-Sensitive Consumers," Management Science, INFORMS, vol. 67(5), pages 2828-2844, May.
    2. Arcan Nalca & Tamer Boyaci & Saibal Ray, 2010. "Competitive price-matching guarantees under imperfect store availability," Quantitative Marketing and Economics (QME), Springer, vol. 8(3), pages 275-300, September.
    3. Leontiou, Anastasia & Ziros, Nicholas, 2024. "“Tacit bundling” among rivals: Limited-availability bargains for loss-averse consumers," European Economic Review, Elsevier, vol. 165(C).
    4. Murali Mantrala & Sönke Albers & Fabio Caldieraro & Ove Jensen & Kissan Joseph & Manfred Krafft & Chakravarthi Narasimhan & Srinath Gopalakrishna & Andris Zoltners & Rajiv Lal & Leonard Lodish, 2010. "Sales force modeling: State of the field and research agenda," Marketing Letters, Springer, vol. 21(3), pages 255-272, September.
    5. Mark Bergen & Daniel Levy & Sourav Ray & Paul H. Rubin & Benjamin Zeliger, 2008. "When Little Things Mean a Lot: On the Inefficiency of Item-Pricing Laws," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 209-250, May.
    6. William L. Wilkie & Carl F. Mela & Gregory T. Gundlach, 1998. "Does “Bait and Switch” Really Benefit Consumers?," Marketing Science, INFORMS, vol. 17(3), pages 273-282.
    7. Pedro M. Gardete, 2013. "Cheap-Talk Advertising and Misrepresentation in Vertically Differentiated Markets," Marketing Science, INFORMS, vol. 32(4), pages 609-621, July.
    8. Eitan Gerstner & Barak Libai, 2006. "—Why Does Poor Service Prevail?," Marketing Science, INFORMS, vol. 25(6), pages 601-603, 11-12.
    9. Bayle-Tourtoulou, Anne-Sophie & Laurent, Gilles & Macé, Sandrine, 2006. "Assesing the frequency and clauses of out-of-stock events through store scanner data," HEC Research Papers Series 830, HEC Paris.
    10. James D. Hess & Eitan Gerstner, 1998. "Yes, “Bait and Switch” Really Benefits Consumers," Marketing Science, INFORMS, vol. 17(3), pages 283-289.
    11. Pradeep Bhardwaj & Yuxin Chen & David Godes, 2008. "Buyer-Initiated vs. Seller-Initiated Information Revelation," Management Science, INFORMS, vol. 54(6), pages 1104-1114, June.
    12. Antonio Rosato, 2016. "Selling substitute goods to loss-averse consumers: limited availability, bargains, and rip-offs," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 709-733, August.
    13. Florian Morath & Johannes Münster, 2018. "Online Shopping and Platform Design with Ex Ante Registration Requirements," Management Science, INFORMS, vol. 64(1), pages 360-380, January.
    14. Fabian Herweg & Antonio Rosato, 2020. "Bait and ditch: Consumer naïveté and salesforce incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(1), pages 97-121, January.
    15. Luís Cabral, 2012. "Lock in and switch: Asymmetric information and new product diffusion," Quantitative Marketing and Economics (QME), Springer, vol. 10(3), pages 375-392, September.
    16. Sandro Ambuehl, 2017. "An Offer You Can't Refuse? Testing Undue Inducement," CESifo Working Paper Series 6296, CESifo.
    17. Chiang, Wei-yu Kevin, 2010. "Product availability in competitive and cooperative dual-channel distribution with stock-out based substitution," European Journal of Operational Research, Elsevier, vol. 200(1), pages 111-126, January.
    18. William L. Wilkie & Carl F. Mela & Gregory T. Gundlach, 1998. "Does “Bait and Switch” Really Benefit Consumers? Advancing the Discussion …," Marketing Science, INFORMS, vol. 17(3), pages 290-293.
    19. Matthew Jones & Bruce Kobayashi & Jason O’Connor, 2018. "Economics at the FTC: Non-price Merger Effects and Deceptive Automobile Ads," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(4), pages 593-614, December.

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