Download or read book The Impact of Consumer Loss Aversion on Pricing written by Paul Heidhues and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Choices Values and Frames written by Daniel Kahneman and published by Cambridge University Press. This book was released on 2000-09-25 with total page 864 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents the definitive exposition of 'prospect theory', a compelling alternative to the classical utility theory of choice. Building on the 1982 volume, Judgement Under Uncertainty, this book brings together seminal papers on prospect theory from economists, decision theorists, and psychologists, including the work of the late Amos Tversky, whose contributions are collected here for the first time. While remaining within a rational choice framework, prospect theory delivers more accurate, empirically verified predictions in key test cases, as well as helping to explain many complex, real-world puzzles. In this volume, it is brought to bear on phenomena as diverse as the principles of legal compensation, the equity premium puzzle in financial markets, and the number of hours that New York cab drivers choose to drive on rainy days. Theoretically elegant and empirically robust, this volume shows how prospect theory has matured into a new science of decision making.

Download or read book Risk and Loss Aversion Price Uncertainty and the Implications for Consumer Search written by Adriaan R. Soetevent and published by . This book was released on 2016 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Do the choices of consumers who search for a product's best price exhibit risk neutral, risk averse or loss averse risk attitudes? We study how in a problem of sequential search with costless recall the relation between a consumer's willingness to pay for continued search and the level of price uncertainty depends on her risk preferences. Independent of the current best price, an increase in price uncertainty encourages continued search when consumers are risk neutral. However, we prove that theory predicts an inversion when consumers are either risk or loss averse. In those cases, an increase in price uncertainty only increases the consumer's willingness to pay (WTP) for continued search if the current best price is sufficiently low.We subsequently use this observation in an empirical test to identify between different risk preferences in a stylized problem of sequential search. In line with the inversion, we find that a reduction in price uncertainty decreases the WTP for continued search when the current best price is low but increases the WTP when it is high. While at odds with the assumption of risk neutrality, this finding is consistent with models of consumer risk and/or loss aversion. Moreover, the model parameters of risk and loss aversion that lead to the best empirical fit have values similar to those estimated for other decision domains.

Download or read book The Effect of Reference Price and Loss Aversion on Consumer Brand Choice Category Purchase and Quantity Decisions written by Mingmei Pang and published by . This book was released on 2017 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study I investigate the effects of reference price on three consumer purchase decisions: consumer brand choice, purchase incidence, and purchase quantity. First, I compare the impact of internal reference price (IRP) and external reference price (ERP) on the three consumer purchase decisions. I hypothesize that (a) consumers rely more on ERP (vs. IRP) in brand choice and purchase quantity decisions, and more on IRP (vs. ERP) in purchase incidence decision; and (b) consumers use both IRP and ERP simultaneously to evaluate shelf price in all three consumer purchase decisions. Second, I examine the impact of consumers’ loss aversion tendencies on the three consumer purchase decisions. I hypothesize that loss aversion affects all three consumer purchase decisions; that is, consumers respond more sensitively to a loss than to a corresponding gain. I estimate models of brand choice, purchase incidence and purchase quantity using multinomial logistic regression, binary logistic regression, and Poisson regression, respectively. Hypotheses are generally supported based on empirical analyses of scanner data for a battery product category. This study contributes to the literature in two ways. First, it is the first study to test the direct impact of reference price on purchase incidence decisions. Second, it is the first study to incorporate both IRP and ERP variables into purchase incidence and purchase quantity decisions. Overall, this study contributes an understanding of the influence of reference price on three consumer purchase decisions, which provides both manufactures and retailers with valuable knowledge to formulate optimal pricing and promotion strategies.

Download or read book Valuing Environmental Goods written by Ronald G. Cummings and published by Rowman & Littlefield Publishers. This book was released on 1986 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: To find more information about Rowman and Littlefield titles, please visit www.rowmanlittlefield.com.

Download or read book Loss Aversion and Trade Policy written by Caroline L. Freund and published by World Bank Publications. This book was released on 2004 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Freund and Özden provide new survey evidence showing that loss aversion and reference dependence are important in shaping people's perception of trade policy. Under the assumption that agents' welfare functions exhibit these behavioral elements, they analyze a model with a welfare-maximizing government and with the lobbying framework of Grossman and Helpman (1994). The policy implications of the augmented models differ in three important ways: There is a region of compensating protection, where a decline in the world price leads to an offsetting increase in protection, such that a constant domestic price is maintained; Protection following a single negative price shock will be persistent; Irrespective of the extent of lobbying, there will be a deviation from free trade that tends to favor loss-making industries. The augmented models are more consistent with the observed structure of protection and, in particular explain why many trade policy instruments are explicitly designed to maintain prices at a given level. This paper-- a product of the Trade Team, Development Research Group-- is part of a larger effort in the group to analyze trade policy formulation"-- World Bank web site.

Download or read book The Bright Side of Loss Aversion in Dynamic and Competitive Markets written by Kangkang Wang and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A well-established phenomenon of consumer buying behavior is that consumers evaluate prices relative to a reference point and exhibit loss aversion; i.e., their propensity to buy is more negatively affected by prices above the reference point than it is positively affected by prices below the reference point. The objective of this paper is to analytically examine how the competitive strategy and profitability of firms are affected by the presence of consumer loss aversion in the price dimension. Although we assume that consumer loss aversion increases consumer propensity to search for lower prices, we find that it does not necessarily lead to lower prices or profits when firms compete over multiple periods and when the consumer reference price in subsequent periods is affected by current prices. Specifically, consumer loss aversion could lead to higher prices and profits when consumer valuation is sufficiently high relative to search costs and the proportion of consumers with positive search costs is in an intermediate range. We also show that when forward-looking firms incorporate the negative effect of price promotions on future profits, the equilibrium range of price promotions may actually increase.

Download or read book Handbook of Behavioral Industrial Organization written by Victor J. Tremblay and published by Edward Elgar Publishing. This book was released on 2018 with total page 483 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook of Behavioral Industrial Organization integrates behavioral economics into industrial organization. Chapters cover concepts such as relative thinking, salience, shrouded attributes, cognitive dissonance, motivated reasoning, confirmation bias, overconfidence, status quo bias, social cooperation and identity. Additional chapters consider industry issues, such as sports and gambling industries, neuroeconomic studies of brands and advertising, and behavioral antitrust law. The Handbook features a wide array of methods (literature surveys, experimental and econometric research, and theoretical modelling), facilitating accessibility to a wide audience.

Download or read book Loss Aversion Price and Quality written by Hugh Sibly and published by . This book was released on 2003 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Understanding Consumer Financial Behavior written by W. Fred van Raaij and published by Springer. This book was released on 2016-07-15 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: Government policies, marketing campaigns of banks, insurance companies, and other financial institutions, and consumers' protective actions all depend on assumptions about consumer financial behavior. Unfortunately, many consumers have no or little knowledge of budgeting, financial products, and financial planning. It is therefore important that organizations and market authorities know why consumers spend, borrow, insure, invest, and save for their retirement - or why they do not. Understanding Consumer Financial Behavior provides a systemic economic and behavioral approach to the way people handle their finances. It discusses the different types of financial behaviors consumers may engage in and explores the psychological explanations for their behavior and choices. This exciting new book is essential reading for scholars of marketing, finance, and management; financial professionals; and consumer policy makers.

Download or read book Pricing and information disclosure in markets with loss averse consumers written by Heiko Karle and published by . This book was released on 2010 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Price Discrimination with Loss Averse Consumers written by Jong-Hee Hahn and published by . This book was released on 2015 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes a theory of price discrimination based on consumer loss aversion. A seller offers a menu of bundles before a consumer learns his willingness to pay, and the consumer experiences gain-loss utility with reference to his prior (rational) expectations about contingent consumption. With binary consumer types, the seller finds it optimal to abandon screening under an intermediate range of loss aversion if the low willingness-to-pay consumer is sufficiently likely. We also identify sufficient conditions under which partial or full pooling dominates screening with a continuum of types. Our predictions are consistent with several observed practices of price discrimination.

Download or read book A Theory of Price Adjustment Under Loss Aversion written by Steffen Ahrens and published by . This book was released on 2014 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a new partial equilibrium theory of price adjustment, based on consumer loss aversion. In line with prospect theory, the consumers' perceived utility losses from price increases are weighted more heavily than the perceived utility gains from price decreases of equal magnitude. Price changes are evaluated relative to an endogenous reference price, which depends on the consumers' rational price expectations from the recent past. By implication, demand responses are more elastic for price increases than for price decreases and thus firms face a downward-sloping demand curve that is kinked at the consumers' reference price. Firms adjust their prices flexibly in response to variations in this demand curve, in the context of an otherwise standard dynamic neoclassical model of monopolistic competition. The resulting theory of price adjustment is starkly at variance with past theories. We find that - in line with the empirical evidence - prices are more sluggish upwards than downwards in response to temporary demand shocks, while they are more sluggish downwards than upwards in response to permanent demand shocks.

Download or read book Loss Aversion and the Uniform Pricing Puzzle for Vertically Differentiated Products written by Pascal Courty and published by . This book was released on 2015 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: The uniform pricing puzzle for vertically differentiated products states that a monopolist sells high and low quality products at the same price despite the fact that quality is perfectly observable and that there are no significant costs of adjusting prices. The puzzle is relevant for movies, books, music, and mobile apps, among others. We show that the puzzle can be resolved by accounting for consumer loss aversion in monetary and consumption utilities and by assuming that consumers face a random utility shock. The novelty of our approach is that the reference transaction is endogenously set as part of a 'personal equilibrium' and includes only past purchases of products of the same quality.

Download or read book Loss aversion and consumption choice theory and experimental evidence written by Heiko Karle and published by . This book was released on 2012 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Foundations of Behavioral Economic Analysis written by Sanjit S. Dhami and published by Oxford University Press. This book was released on 2016 with total page 1799 pages. Available in PDF, EPUB and Kindle. Book excerpt: It considers the evidence against the exponential discounted utility model and describes several behavioral models such as hyperbolic discounting, attribute based models and the reference time theory. Part IV describes the evidence on classical game theory and considers several models of behavioral game theory, including level-k and cognitive hierarchy models, quantal response equilibrium, and psychological game theory. Part V considers behavioral models of learning that include evolutionary game theory, classical models of learning, experience weighted attraction model, learning direction theory, and stochastic social dynamics. Part VI studies the role of emotions; among other topics it considers projection bias, temptation preferences, happiness economics, and interaction between emotions and cognition. Part VII considers bounded rationality. The three main topics considered are judgment heuristics and biases, mental accounting, and behavioral finance.

Download or read book Prospect Theory written by Peter P. Wakker and published by Cambridge University Press. This book was released on 2010-07-22 with total page 519 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prospect Theory: For Risk and Ambiguity, provides a comprehensive and accessible textbook treatment of the way decisions are made both when we have the statistical probabilities associated with uncertain future events (risk) and when we lack them (ambiguity). The book presents models, primarily prospect theory, that are both tractable and psychologically realistic. A method of presentation is chosen that makes the empirical meaning of each theoretical model completely transparent. Prospect theory has many applications in a wide variety of disciplines. The material in the book has been carefully organized to allow readers to select pathways through the book relevant to their own interests. With numerous exercises and worked examples, the book is ideally suited to the needs of students taking courses in decision theory in economics, mathematics, finance, psychology, management science, health, computer science, Bayesian statistics, and engineering.