Discount

A price reduction. A cash discount or a discount for prompt payment is a reduction in price allowed to customers who pay cash or pay promptly. Security stands at a discount if its current market price is below the price it is due to be redeemed. The present discounted value of payments due to be received at a future date is found by reducing them by a percentage per period for each period the receipt is delayed [Black, Hashimzade, Myles, p. 100]. The classical hypothesis that the discount rate is uniform across scenarios, time delays, and sums of cash flow was flatly rejected. A market segmentation approach was found lacking. The results support an implicit risk hypothesis, according to which delayed consequences are associated with an implicit risk value. An added compensation hypothesis asserts that individuals require compensation for a change in their financial position [Benzion, Rapoport, Yagil, p. 274]. A deduction from a bill of exchange when it is purchased before its maturity date. The party that purchases (discounts) the bill pays less than its face value and makes a profit when it matures. The discount amount consists of interest calculated at the bill rate for the length of time the bill has to run. A reduction in the price of goods below the list price for buyers who pay cash ( cash discount ), for members of the trade ( trade discount ), for buying in bulk ( bulk or quantity discount ), etc. [Law, p. 103-104]. Any reduction from the regular list price offered to customers. Negotiated discounting is more a feature of industrial markets; price discounts on goods are more of a feature of consumer markets. The primary purposes of discounting are: to encourage more excellent volume sales; to get rid of end-of-line or discontinued stock; to try to win market share from competitors or to respond to competitor price cutting; to increase purchases in low season periods (such as winter holidays or January sales) [Doyle, p. 105]

Sources:

Benzion, U., Rapoport, A., Yagil, J. (1989). Discount Rates Inferred from Decisions: An Experimental Study. Management Science, 35(3), 270–284. doi: 10.1287/mnsc.35.3.270

Black, J., Hashimzade, N., Myles, G. (2017). A Dictionary of Economics (5 ed.)

Law, J. (2016). A Dictionary of Accounting. Oxford: Oxford University Press.

Doyle, C. (2016). A Dictionary of Marketing (4 ed.) Oxford: Oxford University Press.