“Last-chance” sales: what makes them credible?
This paper analyzes the firms’ standard practice of announcing clearance or “last-chance” sales, namely advertising that a particular product is not going to be available in the market anymore. In the context of a two-period signaling game, prices and advertising decisions of firms are analyzed. The...
| Main Authors: | , |
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| Format: | Article |
| Language: | Spanish |
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Universidad Autónoma de Nuevo León
2009
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| Subjects: | |
| Online Access: | https://ensayos.uanl.mx/index.php/ensayos/article/view/96 |
| Summary: | This paper analyzes the firms’ standard practice of announcing clearance or “last-chance” sales, namely advertising that a particular product is not going to be available in the market anymore. In the context of a two-period signaling game, prices and advertising decisions of firms are analyzed. Then, the set of separating and pooling equilibria is characterized, so that the above usual advertising techniques can be better understood as equilibria of this model for certain parameter values. In particular, this paper shows that, when the firm which continues in the business knows that few of their current customers will come back in future periods, the set of separating equilibria shrinks. That is, fewer future prospects induce all types of firms to compete for current consumers, leading to pooling equilibria in which all firms announce a “last-chance” sale, even if some of them know they will remain in the industry next period. Clasificación JEL: L12, D82. |
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| Physical Description: | Ensayos Revista de Economía; Vol. 28 No. 1 (2009): MAY 2009; 61-80 Ensayos Revista de Economía; Vol. 28 Núm. 1 (2009): MAYO 2009; 61-80 2448-8402 1870-221X |