{"title":"A behavioral model of consumer response to price information","authors":"Daniele Pennesi","doi":"10.1016/j.jebo.2024.106872","DOIUrl":null,"url":null,"abstract":"<div><div>This paper introduces a model of choice that captures heuristics and reference dependence in consumers’ responses to price information. In the model, a product’s quality is positively distorted when its price is close to the reference price. The model is consistent with a kinked and upward-sloping demand curve. The price and cross-price elasticities of demand can be positive or negative, asymmetric, and product-dependent. The model provides an explanation for quality-dependent price stickiness, justifies the adoption of complex pricing strategies, and allows for the derivation of closed-form expressions for the optimal price and reference price set by a monopolist. The model is fully characterized by testable restrictions on demand data, offering a method for identifying the reference price.</div></div>","PeriodicalId":48409,"journal":{"name":"Journal of Economic Behavior & Organization","volume":"230 ","pages":"Article 106872"},"PeriodicalIF":2.3000,"publicationDate":"2025-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Economic Behavior & Organization","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0167268124004864","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"2025/1/10 0:00:00","PubModel":"Epub","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
This paper introduces a model of choice that captures heuristics and reference dependence in consumers’ responses to price information. In the model, a product’s quality is positively distorted when its price is close to the reference price. The model is consistent with a kinked and upward-sloping demand curve. The price and cross-price elasticities of demand can be positive or negative, asymmetric, and product-dependent. The model provides an explanation for quality-dependent price stickiness, justifies the adoption of complex pricing strategies, and allows for the derivation of closed-form expressions for the optimal price and reference price set by a monopolist. The model is fully characterized by testable restrictions on demand data, offering a method for identifying the reference price.
期刊介绍：
The Journal of Economic Behavior and Organization is devoted to theoretical and empirical research concerning economic decision, organization and behavior and to economic change in all its aspects. Its specific purposes are to foster an improved understanding of how human cognitive, computational and informational characteristics influence the working of economic organizations and market economies and how an economy structural features lead to various types of micro and macro behavior, to changing patterns of development and to institutional evolution. Research with these purposes that explore the interrelations of economics with other disciplines such as biology, psychology, law, anthropology, sociology and mathematics is particularly welcome.
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