Working Paper: CEPR ID: DP16340
Authors: Kfir Eliaz; Sarit Weisburd; Orli Orenkolbinger
Abstract: Supermarket shopping typically entails repeated purchases of many items from multiple product categories, when the prices in each category are subject to frequent changes. Retailers often alert shoppers to price decreases through announcements of discounts. We analyze how shoppers respond to such information on discounts in multiple product categories using data from a field experiment on a website for online grocery shopping. We compare purchasing decisions made by shoppers who received (coarse) information on discounts, to shoppers who had access to these same discounts but did not receive any information on them. We find that only shoppers who purchased in a discounted food category prior to the experiment exhibit a significant response to the information. This response takes the form of an increase in purchases in the discounted category of items that shoppers had already purchased in the past, regardless of whether these items are currently on sale. Thus, during a sale, demand increases for both the discounted items and their more expensive substitutes within the discounted category. We show that this effect is driven by unbranded products, and it subsides when shoppers are provided with more detailed information on the discounted products.
Keywords: costly search; inertia; information processing; promotions; supermarket shopping
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Promotional information (M31) | Shopper behavior (D19) |
| Previous purchases from discounted food category (D12) | Response to discount information (L42) |
| Response to discount information (L42) | Demand for discounted items (D12) |
| Response to discount information (L42) | Demand for more expensive substitutes (D11) |
| Precise information about discounts (L42) | Purchasing rate of nondiscounted substitutes (D11) |
| Coarse information on discounts (L42) | Consumer spending (D12) |
| Coarse information on discounts (L42) | Seller revenue (L85) |
| Treatment shoppers (D19) | Demand for nondiscounted products (D12) |