An Economic Analysis of Add‐on Discounts | Zendy

Adachi Takanori | Zendy; Ebina Takeshi | Zendy

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An Economic Analysis of Add‐on Discounts

Author(s) -

Adachi Takanori,

Ebina Takeshi

Publication year - 2012

Publication title -

managerial and decision economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.288

H-Index - 51

eISSN - 1099-1468

pISSN - 0143-6570

DOI - 10.1002/mde.1564

Subject(s) - monopolistic competition , construct (python library) , microeconomics , economics , base (topology) , business , advertising , commerce , computer science , monopoly , mathematical analysis , mathematics , programming language

This paper provides an economic explanation for what determines whether a seller should offer add‐on discounts (e.g., cable TV subscription packages). We construct a monopolistic model with two types of consumer heterogeneity: (i) those who always buy an add‐on when they purchase a base good (‘premium’ consumers); and (ii) those who do not necessarily buy the add‐on (‘economy’ consumers). It is shown that the greater the number of ‘premium’ consumers, the less desirable add‐on discounts are for a seller. Copyright © 2011 John Wiley & Sons, Ltd.

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