Discussion paper

DP12480 The Value of Online Scarcity Signals

Online retailers use scarcity cues to increase sales. Many fear that these pressure tactics are meant to manipulate behavioral biases by creating a sense of urgency. At the same time, scarcity cues could also convey valuable information. We measure the value of the scarcity
messages posted by Expedia to a Bayesian rational consumer. A signal reveals information on the number of seats available at the posted price. Consumers can use this information to optimally time when they purchase a ticket. The maximum increase in expected utility
for a naive consumer, who does not use publicly available information, is 8 percent. For a sophisticated consumer, the increase is between 4-7 percent. Scarcity signals have a negligible impact on seller revenue and consumption.

£6.00
Citation

Courty, P (2017), ‘DP12480 The Value of Online Scarcity Signals‘, CEPR Discussion Paper No. 12480. CEPR Press, Paris & London. https://cepr.org/publications/dp12480