òòò½Íø Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Buy Baits and Consumer Sophistication: Field Evidence from Instant Rebates
òòò½Íø Journal: Economic Policy
vol. 17,
no. 2, May 2025
(pp. 30–59)
Abstract
Are consumers in the marketplace aware of their cognitive limitations? I answer this question in the context of a ubiquitous form of price discrimination: instant rebates that require active redemption. In a large-scale field experiment with a major online retailer, I find that consumers correctly increase demand when the firm offers a redemption reminder, but they fail to reduce demand when the firm increases the hassle required to redeem. Structural estimates reveal that, while consumers are sophisticated about the probability of forgetting to redeem the rebate, they vastly underestimate the hassle of redeeming it by €20 per consumer.Citation
Rodemeier, Matthias. 2025. "Buy Baits and Consumer Sophistication: Field Evidence from Instant Rebates." òòò½Íø Journal: Economic Policy 17 (2): 30–59. DOI: 10.1257/pol.20230358Additional Materials
JEL Classification
- C93 Field Experiments
- D12 Consumer Economics: Empirical Analysis
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- L81 Retail and Wholesale Trade; e-Commerce
- M31 Marketing