Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129527
Authors: 
Karle, Heiko
Peitz, Martin
Year of Publication: 
2012
Series/Report no.: 
Working Paper Series, Department of Economics, University of Mannheim 12-8
Abstract: 
We address the effect of contextual consumer loss aversion on firm strategy in imperfect competition. Consumers are fully informed about match value and price at the moment of purchase. However, some consumers are initially uninformed about their tastes and form a reference point consisting of an expected match—value and price distribution, while others are perfectly informed all the time. We show that, in duopoly, a larger share of informed consumers leads to a less competitive outcome if the asymmetry between firms is sufficiently large and that narrowing the set of products which consumers consider leads to a more competitive outcome.
Subjects: 
Contextual loss aversion
reference-dependent utility
behavioral industrial organization
imperfect competition
product differentiation
JEL: 
D83
L13
L41
M37
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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