Reference Dependence and Market Competition

Jidong Zhou ()

Journal of Economics & Management Strategy, 2011, vol. 20, issue 4, 1073-1097

Abstract: This paper examines the implications of consumer reference dependence for market competition. If consumers take some product (e.g., the first product they consider) as the reference point when evaluating others and they exhibit loss aversion, then the more “prominent” firm whose product is taken as the reference point by more consumers will randomize between a high and a low price. We also find that consumer loss aversion in the price dimension intensifies competition while that in the product dimension softens competition. With consumer reference dependence, asymmetric prominence can arise as an equilibrium outcome when firms advertise before engaging in price competition.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

Downloads: (external link)
https://doi.org/10.1111/j.1530-9134.2011.00309.x

Related works:
Working Paper: Reference Dependence and Market Competition (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:20:y:2011:i:4:p:1073-1097

Ordering information: This journal article can be ordered from
http://www.blackwell ... ref=1058-6407&site=1

Access Statistics for this article

More articles in Journal of Economics & Management Strategy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().