Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/140890
Authors: 
Chenavaz, Régis
Year of Publication: 
2016
Series/Report no.: 
Economics Discussion Papers 2016-20
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.
Subjects: 
dynamic pricing
behavioral pricing
reference dependence
optimal control
JEL: 
C61
M21
D03
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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