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Consumer Resistance

Marco Bertini (marco.bertini@esade.edu), Stefan Buehler and Daniel Halbheer (halbheer@hec.fr)

No 1804, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: This paper studies the impact of consumer resistance, which is triggered by deviations from a psychological reference point, on optimal pricing and cost communication. Assuming that consumers evaluate purchases not only in the material domain, we show that consumer resistance reduces the pricing power and profit. We also show that consumer resistance provides an incentive to engage in cost communication when consumers underestimate cost. While cheap communication does not affect behavior, persuasive communication may increase sales and profit. Finally, we show that a firm can benefit from engaging in operational transparency by revealing information about features of the production process.

Keywords: Price Fairness; Cost Communication; Operational Transparency (search for similar items in EconPapers)
JEL-codes: D9 L11 L21 M31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-04
New Economics Papers: this item is included in nep-ind and nep-mkt
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Citations: View citations in EconPapers (1)

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