Reference Distorted Prices

Research output: Working paperDiscussion paper

Abstract / Description of output

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 ìvaluationî, and for why trade might a§ect high quality local Örms
ìunfairlyî.
Original languageEnglish
PublisherEdinburgh School of Economics Discussion Paper Series
Number of pages35
Publication statusPublished - 9 May 2011

Publication series

NameESE Discussion Papers
No.204

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