Article ID: | iaor19911223 |
Country: | United States |
Volume: | 9 |
Issue: | 2 |
Start Page Number: | 189 |
End Page Number: | 195 |
Publication Date: | Mar 1990 |
Journal: | Marketing Science |
Authors: | Gerstner Eitan, Hess James D. |
The authors present a model that leads to an equilibrium with characteristics similar to the following stylized facts observed in retail markets: (a) Retailers advertise only selected brands; (b) Often low priced advertised brands are understocked; (c) In-store promotions are biased towards more expensive substitute brands. Together these practices constitute illegal bait and switch. Is this phenomenon necessarily harmful to consumers and to the economy? The authors show that bait and switch can benefit consumers because utility is created through in-store promotiosn and price competition is enhanced. This suggests that the FTC investigate further its ban on bait and switch.