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Profitability of price promotions if stockpilling increases consumption

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  • Teunter, L.H.
  • Teunter, R.H.

Abstract

Price promotions induce consumers to purchase higher-than-usual quantities, resulting in higher stocks that lead to increased consumption. We show for a stylized model with a single shop and a single loyal customer that because of this stockpiling effect, promotions can be profitable even if they do not attract extra customers.

Suggested Citation

  • Teunter, L.H. & Teunter, R.H., 2004. "Profitability of price promotions if stockpilling increases consumption," Econometric Institute Research Papers EI 2004-10, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    • Handle: RePEc:ems:eureir:1198
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    1. David R. Bell & James M. Lattin, 1998. "Shopping Behavior and Consumer Preference for Store Price Format: Why “Large Basket” Shoppers Prefer EDLP," Marketing Science, INFORMS, vol. 17(1), pages 66-88.
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