Loss aversion and the uniform pricing puzzle for media and entertainment products
Pascal Courty () and
Javad Nasiry ()
Additional contact information
Javad Nasiry: Hong Kong University of Science and Technology
Economic Theory, 2018, vol. 66, issue 1, No 4, 105-140
Abstract The uniform pricing puzzle for vertically differentiated media and entertainment products (movies, books, music, mobile apps, etc.) is that a firm with market power sells high- and low-quality products at the same price even though quality is perfectly observable and price adjustments are not costly. We resolve this puzzle by assuming that consumers have an uncertain taste for quality and accounting for consumer loss aversion in monetary and consumption utilities. The novelty of our approach is that the so-called reference transaction is endogenously set as part of a “personal equilibrium” and is based only on past purchases of same-quality products.
Keywords: Uniform pricing puzzle; Vertically differentiated products; Expectations-based loss aversion; Personal equilibrium (search for similar items in EconPapers)
JEL-codes: D03 L82 D21 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s00199-017-1055-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:66:y:2018:i:1:d:10.1007_s00199-017-1055-y
Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2
Access Statistics for this article
Economic Theory is currently edited by Nichoals Yanneils
More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().