Reference Distorted Prices

Jozsef Sakovics

doi:10.1007/s11129-011-9104-5

Reference Distorted Prices

Jozsef Sakovics

School of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

I show that when consumers (mis) perceive prices relative to reference prices, budgets turn out to be soft, prices tend to be lower and the average quality of goods sold decreases. These observations provide explanations for decentralized purchase decisions, for people being happy with a purchase even when they have paid their "valuation", and for why trade might affect high quality local firms "unfairly".

Original language	English
Pages (from-to)	339-363
Number of pages	25
Journal	Quantitative Marketing and Economics
Volume	9
Issue number	4
DOIs	https://doi.org/10.1007/s11129-011-9104-5
Publication status	Published - Dec 2011

Keywords

Reference price
Soft budget constraint
Transaction contraint
Transaction utility
Leftover utility
D11

Access to Document

10.1007/s11129-011-9104-5

Reference distorted prices
© Sakovics, J. (2011). Reference distorted prices. Quantitative Marketing and Economics, 9(4), 339-363, http://dx/doi.org/10.1007/s11129-011-9104-5 The final publication is available at link.springer.com
Accepted author manuscript, 223 KB

http://download.springer.com/static/pdf/183/art%253A10.1007%252Fs11129-011-9104-5.pdf?auth66=1394292571_67f537ffff3a9fbf7efe7fac78e79191&ext=.pdf

Cite this

@article{79a161ce6e9a4a9b9850b104b3a333ef,

title = "Reference Distorted Prices",

abstract = "I show that when consumers (mis) perceive prices relative to reference prices, budgets turn out to be soft, prices tend to be lower and the average quality of goods sold decreases. These observations provide explanations for decentralized purchase decisions, for people being happy with a purchase even when they have paid their {"}valuation{"}, and for why trade might affect high quality local firms {"}unfairly{"}.",

keywords = "Reference price, Soft budget constraint, Transaction contraint, Transaction utility, Leftover utility, D11",

author = "Jozsef Sakovics",

year = "2011",

month = dec,

doi = "10.1007/s11129-011-9104-5",

language = "English",

volume = "9",

pages = "339--363",

journal = "Quantitative Marketing and Economics",

issn = "1570-7156",

publisher = "Kluwer Academic Publishers",

number = "4",

}

TY - JOUR

T1 - Reference Distorted Prices

AU - Sakovics, Jozsef

PY - 2011/12

Y1 - 2011/12

N2 - I show that when consumers (mis) perceive prices relative to reference prices, budgets turn out to be soft, prices tend to be lower and the average quality of goods sold decreases. These observations provide explanations for decentralized purchase decisions, for people being happy with a purchase even when they have paid their "valuation", and for why trade might affect high quality local firms "unfairly".

AB - I show that when consumers (mis) perceive prices relative to reference prices, budgets turn out to be soft, prices tend to be lower and the average quality of goods sold decreases. These observations provide explanations for decentralized purchase decisions, for people being happy with a purchase even when they have paid their "valuation", and for why trade might affect high quality local firms "unfairly".

KW - Reference price

KW - Soft budget constraint

KW - Transaction contraint

KW - Transaction utility

KW - Leftover utility

KW - D11

U2 - 10.1007/s11129-011-9104-5

DO - 10.1007/s11129-011-9104-5

M3 - Article

VL - 9

SP - 339

EP - 363

JO - Quantitative Marketing and Economics

JF - Quantitative Marketing and Economics

SN - 1570-7156

IS - 4

ER -

Reference Distorted Prices

Abstract

Keywords

Access to Document

Fingerprint

Cite this