The Value of Online Scarcity Signals

Pascal Courty and Sinan Ozel

No 12480, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Scarcity; Persuasion; Online recommendations; Price discrimination; Airline ticket (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-ict, nep-ind, nep-mkt and nep-upt
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Journal Article: The value of online scarcity signals (2019)
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