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The Value of Online Scarcity Signals

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  • Courty, Pascal
  • Ozel, Sinan

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.

Suggested Citation

  • Courty, Pascal & Ozel, Sinan, 2017. "The Value of Online Scarcity Signals," CEPR Discussion Papers 12480, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12480
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    Cited by:

    1. Huang, Huiling & Liu, Stephanie Q. & Kandampully, Jay & Bujisic, Milos, 2020. "Consumer Responses to Scarcity Appeals in Online Booking," Annals of Tourism Research, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    Scarcity; Persuasion; Online recommendations; Price discrimination; Airline ticket;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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