Discounts and consumer search behavior: The role of framing

Abstract

This paper studies the pure framing effect of price discounts, focusing on its impact on consumer search behavior. In a simple two-shop search experiment, we compare search behavior in base treatments (where both shops post net prices without discounts) to discount treatments (where either the first shop or the second shop posts gross prices with separate discount offers, keeping the net prices constant). Although the objective search problems are identical across treatments, subjects search less in discount frames, irrespective where the discount is offered. There is evidence showing that subjects only base their decisions on salient characteristics of the situation rather than on the objective price information.