Abstract
Many consumers have had the experience of entering discount membership clubs to make a few purchases, only to leave with enough pasta to outlast a nuclear winter. We suggest that the presence of membership can lead consumers to infer a fees -> link, spurring them to increase their spending independent of the actual savings afforded by such clubs. Using both field data and studies in which we created our own membership clubs, we show that 1) serve as a signal of price discounts, such that stores that charge are perceived as offering better deals for identical items; 2) the presence of can increase consumer spending and overall store profitability; and 3) the presence of can drive choice of retail outlets, such that stores with membership are more popular even when they offer the same goods at the same prices as stores without fees.
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