Reference distorted prices

Sákovics, József
Authors registered in the RePEc Author Service: József Sákovics

No 2011-28, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: I show that when consumers (mis)perceive prices relative to reference prices, budgets turn out to be soft, prices tend to be lower and the average quality of goods sold decreases. These observations provide explanations for decentralized purchase decisions, for people being happy with a purchase even when they have paid their evaluation, and for why trade might affect high quality local firms 'unfairly'.

Date: 2011
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Citations: View citations in EconPapers (5)

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