Mail in Rebates: What the Firms Do Not Want You to Know

Abstract

The theory of present biased preferences appears to fall apart in the case of mail in rebates. The theory states that if a purchase is made, no matter the primary objective, the consumer will redeem the mail in rebate within the time period allowed. Yet 50% of the people who purchase an electronic good accompanied by a mail in rebate fail to redeem it. Sometimes the proportion of the rebate reaches 100% of the value of the product. Why is this the case? Mail in rebates constitutes one of the many monetary strategies which firms make available to consumers from time to time. I then discuss the motivation for this paper and proceed to provide the findings of the past literature. Chapter 2 is dedicated to the development of a basic model with a single firm. In Chapter 3 the model is expanded to consider market competitors and their impact on the interactive game based on the nature of the market. The conclusion will summarize the findings of the model and proceed to make recommendations for future work. Work is already under way to come up with an experimental design appropriate to test the model.