Do Firms Use Coupons and In-Store Discounts to Strategically Market Experience Goods Over the Consumption Life-Cycle? The Case of Cigarettes
In: NBER Working Paper No. w19310
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In: NBER Working Paper No. w19310
SSRN
In: The B.E. journal of economic analysis & policy, Band 11, Heft 2
ISSN: 1935-1682
Abstract
In many credence goods markets, a seller simultaneously diagnoses a problem and offers a recommendation to fix it. One might wonder what prevents these sellers from always exaggerating their customer's needs. In this paper, we offer a simple explanation, namely, consumers may spurn sellers who have a reputation for such "demand inducement." We test this explanation by examining patient choice of obstetrician in Florida. In most of the counties that we study, we find that maternity patients are significantly less likely to choose obstetricians who perform more than the expected number of cesarean sections. We address simultaneity by instrumenting for "inducement propensity" using information about the obstetrician's training. Although the instrument is weak, a series of robustness tests suggests that our findings are plausible while ruling out alternative explanations.