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Cosumer Disenchantment, Loss Aversion and Price Rigidity

Author

Listed:
  • Sibly, H.

Abstract

A 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.

Suggested Citation

  • Sibly, H., 1996. "Cosumer Disenchantment, Loss Aversion and Price Rigidity," Papers 1996-12, Tasmania - Department of Economics.
  • Handle: RePEc:fth:tasman:1996-12
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    Cited by:

    1. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2017. "A theory of price adjustment under loss aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 78-95.
    2. Sibly, Hugh, 2002. "Loss averse customers and price inflexibility," Journal of Economic Psychology, Elsevier, vol. 23(4), pages 521-538, August.

    More about this item

    Keywords

    PRICING; CONSUMPTION; ENTERPRISES;

    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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