Price Salience and Product Choice

Thomas Blake, Sarah Moshary, Kane Sweeney, Steven Tadelis

NBER Working Paper No. 25186
Issued in October 2018
NBER Program(s):Industrial Organization

We study the effect of price salience on whether a product is purchased and, conditional on purchase, the quality purchased. Consistent with our theoretical predictions, we find that making the full purchase price salient to consumers reduces both the quality and quantity of goods purchased. The effect of salience on quality accounts for at least 28% of the overall revenue decline. Evidence shows that the effects persist beyond the first purchase and impact even experienced users. Detailed click-stream data shows that price-obfuscation makes price comparisons difficult and results in consumers spending more than they otherwise would. We also find that sellers respond to the increased price obfuscation by listing higher quality tickets.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Acknowledgments and Disclosures

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w25186