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Fake discounts in stores fool some shoppers more than others—here’s why | MarketWatch

It’s an experience most of us have had when shopping in a store. You’re rifling through the sales rack in search of a bargain. You find a shirt and trying to decide if it’s worth buying, so you look at the original price.

But if you’re shopping at a dishonest retailer, what’s on the price tag may fool you into buying an item that’s not really discounted all that much. The retailer might have been creative with the pricing. Was the clothing super-expensive for a short period of time, so it could be sold at a more dramatic discount? Or was the original price merely a loose estimate?

A new working paper from Donald Ngwe, an assistant professor at Harvard Business School, looked at how effective fake discounts are in driving business at retailers. Fake “original” list prices are a common strategy among some retailers — especially with outlet or discount stores.

While outlet stores do sell products that were originally sold at full price in regular stores, they also carry products that were delivered straight from the factory. Those factory goods, which were meant only to be sold in outlet stores, often still carry an “original” price that was never an actual selling price upon which a discount is taken.

Ngwe first analyzed transaction data at outlet stores to examine the impact of fictitious pricing on consumers’ purchase choices. He then ran an experiment where he asked more than 1,000 consumers whether they would purchase a product after supplying them with both the real and a fake original list price.

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Fake discounts in stores fool some shoppers more than others—here’s why – MarketWatch.

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