Marketing Seminar（2014-04）

Title:Repeated Consumption Under Long-Term Price Schemes

Speaker:Ruhai Wu

Affiliation:McMaster University

Time: :Wednesday18 June. 13:30-15:00pm

Location:Room217, Guanghua Building 2

Abstract:

In industries where consumers continually purchase and consume goods or services, firms often offer various price schemes based on the consumers' long-term patterns of repeated consumptions. Existing research (Della Vigna & Malmendier 2006, Lambrecht & Skiera 2006) discovers some puzzles of irrational consumption patterns, which consequently raise doubts about the effectiveness of the firms' pricing strategies. This paper examines the dynamic of a consumer's repeated consumptions under different price schemes including pay-as-you-go, monthly membership, pre-paid multi-visit pass, and loyalty program. It provides a rationality-based explanation to the above puzzles. This paper shows how price schemes shape a consumer’s long-term consumption pattern, providing a theoretical background for the firms’ optimal design of pricing schemes.

Your participation is warmly welcomed!