Cosumer Disenchantment, Loss Aversion and Price Rigidity
AbstractA retail market in which customers repeat purchase is considered. Customers are influenced not only by the price set by the firm, but by their level of disenchantment. Disenchantment measures the degree of customer disaffection in the customer-firm relationship. Changes in price lead to proportional changes in disenchantment. It is demonstrated that when customers possess loss aversion with respect to disenchantment levels, the firm's optimal response is characterised by price rigidity.
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Bibliographic InfoPaper provided by Tasmania - Department of Economics in its series Papers with number 1996-12.
Length: 21 pages
Date of creation: 1996
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Postal: UNIVERSITY OF TASMANIA, DEPARTMENT OF ECONOMICS, HOBART TASMANIA 7001 AUSTRALIA.
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Web page: http://www.utas.edu.au/economics-finance/
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PRICING; CONSUMPTION; ENTERPRISES;
Find related papers by JEL classification:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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- Sibly, Hugh, 2002. "Loss averse customers and price inflexibility," Journal of Economic Psychology, Elsevier, vol. 23(4), pages 521-538, August.
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