Incorporating Reference Price Effects into a Theory of Consumer Choice

1992 ◽  
Vol 11 (3) ◽  
pp. 287-309 ◽  
Author(s):  
Daniel S. Putler
Keyword(s):  
Consumer Choice ◽  
Reference Price ◽  
Price Effects

scholarly journals Strategic Analysis of the Pricing Mechanisms in an Online Book Supply Chain in the Presence of Reference Price Effects

2021 ◽  
Vol 16 (5) ◽  
pp. 1492-1516
Author(s):  
Wenhua Hou ◽  
Yuwen Zeng
Keyword(s):  
Supply Chain ◽  
Discount Rate ◽  
Reference Price ◽  
Stackelberg Game ◽  
Lower Boundary ◽  
Retail Price ◽  
Reference Points ◽  
Price Effects ◽  
Retail Prices ◽  
Online Book

(1) Background: A binding recommended retail price has been used in several markets in a variety of forms, and the book market is a typical example. Publishers sell books to online retailers at a unit wholesale discount computed on the cover price. Retailers are then allowed to set the retail price. Therefore, if consumers regard the cover prices as reference points, then they may be more likely to purchase books if retail prices are lower than the cover prices. (2) Methods: We develop a Stackelberg game model for a book supply chain to investigates how reference price effects affect retailers and publisher’s pricing strategies. (3) Results: The results show that retailers will sell printed books at a discount only when the publisher’s wholesale discount rate is not high. Further, as the intensity of the reference price effects increases, (a) the lower boundary of the wholesale discount rate rises, (b) publishers’ profits increase and (c) retailers’ profits increase relative to the level of consumers’ e-books acceptance. (4) Conclusions: This result is related to the fact that the online retailer, such as Amazon and JD.com, like to invoke reference price effects in consumers’ minds by highlighting the printed book’s discount rate.

Technical Note—Dynamic Pricing with Gain-Seeking Reference Price Effects

2016 ◽  
Vol 64 (1) ◽  
pp. 150-157 ◽  
Author(s):  
Zhenyu Hu ◽  
Xin Chen ◽  
Peng Hu
Keyword(s):  
Dynamic Pricing ◽  
Reference Price ◽  
Technical Note ◽  
Price Effects

E‐tail and retail reference price effects

2005 ◽  
Vol 14 (2) ◽  
pp. 129-136 ◽  
Author(s):  
David M. Hardesty ◽  
Tracy A. Suter
Keyword(s):  
Reference Price ◽  
Price Effects

scholarly journals International Real Estate Review

2017 ◽  
Vol 20 (1) ◽  
pp. 75-104
Author(s):  
Han-Jang No ◽  
◽  
Dai-Won Kim ◽  
Jung-Suk Yu ◽  
◽  
...  
Keyword(s):  
Real Estate ◽  
Reference Price ◽  
Least Square ◽  
Selling Price ◽  
Ordinary Least Square ◽  
Seoul Metropolitan Area ◽  
Reserve Prices ◽  
Price Effects ◽  
Transfer Prices ◽  
Final Property

This study examines whether the reserve prices in court auctions of residential real estate in Seoul, Korea result in reference price effects by influencing the amount of the successful bid. We also explore whether the sensitivity of these reference price effects differ with housing size and assess whether the expected rate of the selling price can be predicted based on the different reserve price levels. The panel data estimates presented herein show that reserve prices positively influence the final property transfer prices; in other words, the reserve prices yield strong reference price effects. The results of the ordinary least square regressions show that the sensitivity of the reference price effects differs with housing size, albeit in an inconsistent manner. Finally, the response surface methodology analysis indicates * Corresponding author 76 No, Kim and Yu that different reserve prices lead to different reference price effects with locality across the Seoul metropolitan area. The study thus provides courts and bidders with the means to predict the potential rate of the selling price, which will be useful for decision making in auctions.

Nonlinear Pricing with Reference Dependence

2020 ◽  
Author(s):  
Catarina Roseta-Palma ◽  
Miguel Carvalho ◽  
Ricardo Correia
Keyword(s):  
Water Demand ◽  
Consumer Choice ◽  
Reference Price ◽  
Continuous Model ◽  
Nonlinear Pricing ◽  
Unit Price ◽  
Reference Dependence ◽  
Consumption Decisions ◽  
Gain Loss ◽  
Access Charges

Many utilities, including water, electricity, and gas, use nonlinear pricing schedules which replace a single uniform unit price, with multiple elements such as access charges and consumption blocks with different prices. Whereas consumers are typically assumed to be utility maximizers with nonlinear budget constraints, it is more likely that consumer behavior shows limited-rationality features such as reference dependence. Recent studies of water demand have explored consumer reactions to social comparison nudges, which can moderate consumption and might be a useful tool given low demand-price elasticities. Other authors have noted the difficulties of correct price perception when tariff schedules are complex, and attributed those low elasticities to a lack of information. Nonetheless, it is also possible that consumers form reference prices, relative to which the actual price paid is compared, in a way that affects consumption choices. Faced with a nonlinear price schedule, such as increasing block tariffs, consumers could evaluate their actual marginal price as a loss or a gain relative to a particular reference price that is derived from the schedule. Introducing gain/loss terms into the utility function, in the discrete/continuous model of consumer choice that has been widely used for water demand analysis, leads to consumption decisions that vary when a higher-than-reference price is seen as a loss and a lower-than-reference price as a gain. Utilities might wish to explore these reference-price effects according to their strategic goals. For example, if there are capacity constraints or water scarcity problems, potential water savings can be achieved from highlighting the first-block price as a reference and framing higher-block prices as losses, inducing conservation even without raising overall prices. Furthermore, if higher-block prices are subsequently raised the demand response could be stronger.

scholarly journals Joint Pricing and Inventory Replenishment Decisions with Returns and Expediting under Reference Price Effects

2019 ◽  
Vol 2019 ◽  
pp. 1-17
Author(s):  
Yuan Li ◽  
Yumei Hou
Keyword(s):  
Reference Price ◽  
Base Stock ◽  
List Price ◽  
Optimal Pricing ◽  
Threshold Policy ◽  
Inventory Replenishment ◽  
Base Stock Policy ◽  
Price Effects ◽  
Joint Pricing ◽  
Stock Policy

This paper considers a single-item joint pricing and inventory replenishment problem under reference price effects in consecutive T periods. Demands in consecutive periods are sensitive to price and reference price with general demand distribution. At the end of each period, after the demand realization, a firm can return excess stocks to a supplier or place an expediting order to reduce the loss by shortage. Unfilled demands are fully backlogged. In order to maximize the total expected discounted profit with reference price effects the optimal pricing and inventory replenishment policies for regular order and the inventory adjustment decisions for returning/expediting are derived. The optimal replenishment policy for regular order is a base-stock policy, the optimal pricing policy is a base-stock-list-price policy, and the optimal policy for returning/expediting inventory adjustment follows a dual-threshold policy. Furthermore, the analysis of the operational impacts (from the perspective of adding returning/expediting and reference price effects, respectively) is researched. Numerical results also show that considering both returning/expediting and reference price effects is more profitable than considering only one of them.

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