Loss aversion, price and quality
AbstractThe Spence model (1975) is extended so that customersÃ¢â¬â¢ utility depends on their disposition to the firm in addition to quantity and quality of the good consumed. Disposition is determined by customersÃ¢â¬â¢ perception of firmÃ¢â¬â¢s pricing and quality decisions, which perception is Ã¢â¬Ëreference dependentÃ¢â¬â¢. The profit maximising and efficient price and quality combinations are derived. Adjustment to a change in economic conditions may call for price rigidity, quality rigidity or both depending on the level of the reference price and quality
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Bibliographic InfoArticle provided by Elsevier in its journal The Journal of Socio-Economics.
Volume (Year): 36 (2007)
Issue (Month): 5 (October)
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- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
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