Incorporating Reference Price Effects into a Theory of Consumer Choice

Daniel S. Putler
Additional contact information
Daniel S. Putler: Economic Research Service, USDA and Purdue University

Marketing Science, 1992, vol. 11, issue 3, 287-309

Abstract: Although there has been a good deal of research on incorporating the effects of reference price formation into empirical models of consumer buying behavior, little formal theoretical work had been undertaken to date. This paper incorporates reference price effects into the traditional economic theory of consumer choice, and examines the effects of reference price formation on the results of the traditional theory, its marketing implications, and the implications for empirical models which examine the effects of reference price formation on actual consumer behavior. Several implications of the theoretical model are empirically tested using weekly retail egg sales data from Southern California. This analysis indicates that reference price formation does have significant effects on consumer behavior. Furthermore, these effects are asymmetric with consumers two and a half times more responsive to egg price increases that are in excess of the reference price than they are to comparable egg price decreases.

Keywords: buyer behavior; choice models; pricing (search for similar items in EconPapers)
Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (119)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.11.3.287 (application/pdf)

Related works:
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:inm:ormksc:v:11:y:1992:i:3:p:287-309

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().