Profitability of price promotions if stockpilling increases consumption
Price promotions induce consumers to purchase higher-than-usual quantities, resulting in higher stocks that lead to increased consumption. We show for a stylized model with a single shop and a single loyal customer that because of this stockpiling effect, promotions can be profitable even if they do not attract extra customers.
Teunter, L.H., & Teunter, R.H.. (2004). Profitability of price promotions if stockpilling increases consumption (No. EI 2004-10). Retrieved from http://hdl.handle.net/1765/1198