Altruistic Dynamic Pricing with Customer Regret

Julio Rotemberg

Scandinavian Journal of Economics, 2010, vol. 112, issue 4, 646-672

Abstract: A model is considered in which firms internalize the costly regret that consumers experience when prices change unexpectedly. This regret is greater when prices change by more, and this can explain why the actual size of price increases for firms with rigid prices is less sensitive to inflation than in models with fixed costs of changing prices. Regret costs of this form also lead to more variable price changes than fixed costs do. Last, the practice of announcing price increases in advance is easier to rationalize with regret concerns by consumers than with more standard approaches to price rigidity.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
https://doi.org/10.1111/j.1467-9442.2010.01620.x

Related works:
Working Paper: Altruistic Dynamic Pricing with Customer Regret (2009)
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:scandj:v:112:y:2010:i:4:p:646-672

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520

Access Statistics for this article

Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery (contentdelivery@wiley.com).