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.