Drip pricing and its regulation: Experimental evidence
Rasch first author. A laboratory experiment ran duopoly markets of two sellers and one buyer over 20 rounds in four treatments of 54 subjects each, with buyers paying a cost to reveal drip prices and one treatment amounting to a ban. Sellers competed only on base prices and set the highest possible drip, so few buyers searched. Against the ban, drip pricing left consumer surplus lower and seller profits higher, and uncertainty over drip size made buyers miss the cheapest offer.
Rasch first author. A laboratory experiment ran duopoly markets of two sellers and one buyer over 20 rounds in four treatments of 54 subjects each, with buyers paying a cost to reveal drip prices and one treatment amounting to a ban. Sellers competed only on base prices and set the highest possible drip, so few buyers searched. Against the ban, drip pricing left consumer surplus lower and seller profits higher, and uncertainty over drip size made buyers miss the cheapest offer.
Written from the abstract read 2026-10-18.
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Rasch, A., Thöne, M., & Wenzel, T. (2020). Drip pricing and its regulation: Experimental evidence. Journal of Economic Behavior & Organization, 176, 353-370. doi:10.1016/j.jebo.2020.04.007.