Marketing Seminar

(2024-01) 

Topic: Limited-Time Offer and Consumer Search

Speaker: Zheng Gong, Chinese University of Hong Kong, Shenzhen

Time: Wednesday, January 3, 1:00-2:30 p.m. Beijing Time

Location: Room 217, Guanghua Building 2

Abstract

This paper studies a sales tactic that is commonly seen but theoretically under-explored: the limited-time offer. We argue that when consumers require time to evaluate their options, firms have an incentive to employ limited-time offers in order to influence the endogenous search order. By analyzing markets with and without competition, we demonstrate that for firms, limited-time offers are often strictly more profitable than uniform pricing for gaining search prominence, and firms with higher reservation values are more inclined to utilize limited-time offers as their optimal pricing strategy. In particular, in the equilibrium of a competitive market, the firm with the higher reservation value offers discounts within a shorter time window than its competitors, and consumers sample this firm earlier. We illustrate across various model settings how limited-time offers serve as an effective pricing tool for firms to manipulate the search order and the impact of this mechanism on social welfare. Complementing previous findings in the literature, we discover that limited-time offers may increase total welfare by inducing a more socially efficient search order compared to uniform pricing.

Zheng Gong is an Assistant Professor of Marketing at CUHK Shenzhen. He received his PhD in Management from the University of Toronto, and Bachelor's degree at Peking University.  Zheng's areas of expertise include Social Media, Economics of Digitization, Industrial Organization, and Applied Microeconomic Theory. Zheng's research has been published and under r&r in top academic journals like Management Science and Marketing Science, and has received several academic awards, including the Sheth Foundation ISMS Doctoral Dissertation Award, the Young Economist Essay Award, and Gregory Chow Best Paper Award.

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