Psychological Thresholds, Demand and Price Rigidity
The starting point of this paper is the idea of threshold behavior, which has considerable support in psychology but has been neglected by economists. The implications of having a consumer theory that puts emphasis on threshold behavior towards prices and quantities are examined. It is shown that a threshold-based demand curve can be derived from a hierarchical approach to consumer behavior and also from a customs- or habits-oriented response to price by the consumer. These threshold-based demand curves can provide an additional explanation for price rigidity in the product market. Copyright 1992 by Blackwell Publishers Ltd and The Victoria University of Manchester
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Volume (Year): 60 (1992)
Issue (Month): 2 (June)
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