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A Model of Add-On Pricing*

Glenn Ellison^1,2

¹ National Bureau of Economic Research · ² Massachusetts Institute of Technology

This paper examines a competitive model of add-on pricing, the practice of advertising low prices for one good in hopes of selling additional products (or a higher quality product) to consumers at a high price at the point of sale. The main conclusion is that add-on pricing softens price competition between firms and results in higher equilibrium profits.

DOI

10.1162/0033553053970151

Volume

120 (2)

Pages

585-637

Language

en

Export

BibTeX

Sources

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