Loss-leader pricing and upgrades

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A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing loss-leader theories in that firms make a loss on some consumers (who buy the basic version of the good) and a profit on others (who buy the upgrade). (C) 2013 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER SCIENCE SA
Issue Date
2014-01
Language
English
Article Type
Article
Keywords

STRATEGIES

Citation

ECONOMICS LETTERS, v.122, pp.19 - 22

ISSN
0165-1765
DOI
10.1016/j.econlet.2013.10.014
URI
http://hdl.handle.net/10203/187158
Appears in Collection
MT-Journal Papers(저널논문)
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