Designing promotions: Consumers' surprise and perception of discounts

@article{Sun2014DesigningPC,
  title={Designing promotions: Consumers' surprise and perception of discounts},
  author={Wei Sun and Pavankumar Murali and Anshul Sheopuri and Yi-Min Chee},
  journal={IBM J. Res. Dev.},
  year={2014},
  volume={58}
}
This paper proposes a behavioral pricing model that enhances traditional pricing algorithms by incorporating concepts from mathematical psychology and information theory on how consumers perceive discounts. We propose a framework that systematically incorporates the effect of quoted discounts and historical promotions on consumers' valuations and helps marketers determine the optimal discount strategy. We apply our framework on a publicly available data set from an online retailer. The data set… Expand
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