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Loss averse customers and price inflexibility
journal contribution
posted on 2023-05-16, 13:54 authored by Sibly, HA 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.
History
Publication title
Journal of Economic PsychologyVolume
23Issue
4Pagination
521-538ISSN
0167-4870Department/School
TSBEPublisher
Elseview SciencePlace of publication
NetherlandsRepository Status
- Restricted