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Pricing behavior of firms when consumers have an Imperfect Recall

  • Hasan, Syed Akif
  • Subhani, Muhammad Imtiaz
  • Osman, Ms. Amber
  • Mehar, Ayub

Operating in markets which include the characteristics of both the perfect and imperfect competitions has never been so easy for a firm, while setting an acceptable price. Various firms show various pricing behavior to generate and maximize revenues. This paper is an attempt to encompass pricing behaviors of firms when consumers have imperfect recall for the past prices of the products, while giving a thought to ponder that which of the behaviors has an optimal rationale when a firm sets market price for a commodity. The findings concludes that firms set prices as similar as monopolist when the consumers of their products have imperfect recall for price they offered already in yore.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35682.

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Date of creation: 2012
Date of revision:
Handle: RePEc:pra:mprapa:35682
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  1. David Laibson & Xavier Gabaix, 2004. "Competition and Consumer Confusion," Econometric Society 2004 North American Summer Meetings 663, Econometric Society.
  2. Spiegler, Ran, 2006. "Competition over agents with boundedly rational expectations," Theoretical Economics, Econometric Society, vol. 1(2), pages 207-231, June.
  3. Dow, James, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 1-14, January.
  4. Michael R. Baye & John Morgan, 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 448-466, Autumn.
  5. Laibson, David I. & Gabaix, Xavier, 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets," Scholarly Articles 4554333, Harvard University Department of Economics.
  6. Hehenkamp, Burkhard, 2002. "Sluggish Consumers: An Evolutionary Solution to the Bertrand Paradox," Games and Economic Behavior, Elsevier, vol. 40(1), pages 44-76, July.
  7. Xavier Gabaix & David Laibson & Hongyi Li, 2005. "Extreme Value Theory and the Effects of Competition on Profits," Levine's Bibliography 784828000000000656, UCLA Department of Economics.
  8. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
  9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
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