When Retailing and Las Vegas Meet: Probabilistic Free Price Promotions
Nina Mazar, Kristina Shampanier and Dan Ariely compared lottery-type promotions, offering a chance of receiving an entire purchase for free, with sure price promotions of equal expected monetary value, across six experiments in the field and in the laboratory. Consumers were more likely to buy a product promoted with the probabilistic free discount, and likely to buy more of it. The preference seemed primarily due to diminishing sensitivity to prices, and the authors report that the zero price effect, transaction costs and novelty were likely not implicated.
Nina Mazar, Kristina Shampanier and Dan Ariely compared lottery-type promotions, offering a chance of receiving an entire purchase for free, with sure price promotions of equal expected monetary value, across six experiments in the field and in the laboratory. Consumers were more likely to buy a product promoted with the probabilistic free discount, and likely to buy more of it. The preference seemed primarily due to diminishing sensitivity to prices, and the authors report that the zero price effect, transaction costs and novelty were likely not implicated.
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Mazar, N., Shampanier, K., & Ariely, D. (2017). When Retailing and Las Vegas Meet: Probabilistic Free Price Promotions. Management Science, 63(1), 250-266. doi:10.1287/mnsc.2015.2328