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1. Introduction
Recent years have seen the proliferation of retail sales of virtue products (light) and their price promotion has become widespread. Despite this, marketing researchers have given scant attention to the econometric modeling of the differential impact of price promotions of virtue and vice products on sales in a store with scanner data.
Virtue and vice products are typically conceptualized in relation to each other as relative virtues and relative vices (Van Doorn and Verhoef, 2011). Relative vices are products that provide an immediately gratifying experience (e.g. the good taste of an alcoholic beer), but have negative long-term outcomes (e.g. future health problems). Relative virtues are less gratifying (e.g. the bad taste of a non-alcoholic beer) and less appealing in the short-term but have less negative long-term consequences than vices and therefore are a more prudent choice (Van Doorn and Verhoef, 2011; Wertenbroch, 1998; Okada, 2005; Milkman et al., 2008). The alternatives of relative virtue (which connotes positive payoffs or gains) and vice (which connotes negative payoffs or losses) are sometimes assimilated into utilitarian versus hedonic products (Dhar and Wertenbroch, 2000; Sela et al., 2009), as well as relative necessity versus luxury products (Kivetz and Simonson, 2002; Khan and Dhar, 2006), respectively. A utilitarian or necessity item is one that is mainly desired to accomplish a functional or practical task (e.g. computer diskettes, apartments close to work) or to fulfill a basic need[1], while a hedonic or luxury item is something motivated primarily by a desire of pleasure, fantasy and fun (e.g. audio tapes, apartments with a view) (Strahilevitz and Myers, 1998; Khan and Dhar, 2006). However, a fundamental difference is that the payoffs from both utilitarian (necessity) consumption and hedonic (luxury) consumption lie in the gain domain, and any harm that may ensue in the future is speculative, ambiguous and indirect; in contrast, the payoffs from consuming virtues versus vices explicitly straddle the gain and loss domains (Okada, 2005).
The only study we have found to date related to price promotions of virtue and vice products with scanner data is that of Wertenbroch (1998). This study is based on the idea that the order of preference between vice and virtue products changes when consumers evaluate the consequences of immediate or delayed...