DP16340 How do Shoppers Respond to Information on Price Changes in Multiple Product Categories? Evidence from a Field Experiment in Online Supermarket Shopping

Author(s): Kfir Eliaz, Orli Oren-Kolbinger, Sarit Weisburd
Publication Date: July 2021
Keyword(s): Costly search, inertia, Information Processing, promotions, Supermarket shopping
JEL(s):
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16340

Supermarket shopping typically entails repeated purchases of many items from multiple product categories, when the prices in each category are subject to frequent changes. Retailers often alert shoppers to price decreases through announcements of discounts. We analyze how shoppers respond to such information on discounts in multiple product categories using data from a field experiment on a website for online grocery shopping. We compare purchasing decisions made by shoppers who received (coarse) information on discounts, to shoppers who had access to these same discounts but did not receive any information on them. We find that only shoppers who purchased in a discounted food category prior to the experiment exhibit a significant response to the information. This response takes the form of an increase in purchases in the discounted category of items that shoppers had already purchased in the past, regardless of whether these items are currently on sale. Thus, during a sale, demand increases for both the discounted items and their more expensive substitutes within the discounted category. We show that this effect is driven by unbranded products, and it subsides when shoppers are provided with more detailed information on the discounted products.