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.

hdl.handle.net/1765/1198
Econometric Institute Research Papers
Erasmus School of Economics

Teunter, L., & Teunter, R. (2004). Profitability of price promotions if stockpilling increases consumption (No. EI 2004-10). Econometric Institute Research Papers. Retrieved from http://hdl.handle.net/1765/1198