Title: Dynamic pricing with reference price dependence
Abstract: A firm usually sets the selling price of a product by taking into account consumers' reference price. A behavioral pricing scheme integrating reference effects would suggest that the higher the reference price, the higher the firm can set the price. In this paper, the author investigates this intuition by accounting for reference dependence in an optimal control framework. Results show that the dynamics of price originates from the sensitivity of customers to reference price. Contrary to intuition, price dynamics is not systematically associated to the evolution of the reference price, but derives from competing effects related to the dynamics of the reference price.
Publication Year: 2016
Publication Date: 2016-09-01
Language: en
Type: preprint
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot