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Loss averse customers and price inflexibility

Citation

Sibly, H, Loss averse customers and price inflexibility, Journal of Economic Psychology, 23, (4) pp. 521-538. ISSN 0167-4870 (2002) [Refereed Article]

DOI: doi:10.1016/S0167-4870(02)00100-9

Abstract

A neoclassical model of monopoly is extended to incorporate the influence of customers' disposition toward a firm. Customer's disposition - captured by a variable called 'disenchantment' - and price are the determinants of a firm's demand. Disenchantment is positively related to the difference between the price the firm sets and the customers' 'reference price'. It is demonstrated that when customers are loss averse, the profit maximising price is rigid in the face of demand and cost shocks.

Item Details

Item Type:Refereed Article
Keywords:consumer behaviour, business organisations
Research Division:Economics
Research Group:Economic Theory
Research Field:Economic Theory not elsewhere classified
Objective Division:Economic Framework
Objective Group:Other Economic Framework
Objective Field:Economic Framework not elsewhere classified
Author:Sibly, H (Dr Hugh Sibly)
ID Code:25468
Year Published:2002
Web of Science® Times Cited:7
Deposited By:Economics and Finance
Deposited On:2002-08-01
Last Modified:2017-12-13
Downloads:0

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