期刊名称：Journal of Emerging Trends in Economics and Management Sciences
电子版ISSN：2141-7024
出版年度：2014
卷号：5
期号：2
页码：187-193
出版社：Scholarlink Resource Centre
摘要：This paper studies the integrative impact of reference effect and substitution effect on the price decision offirms. We start with a monopolist selling the product in two sequential selling periods. An internal referenceeffect as an additional component of the base demand occurs in the second period. Analytically, such effect canencourage the firm to set a higher price firstly to better establish a higher reference effect which exaggerates thedemand in a near future. We explicitly illustrate the price distortion between the scenario with and withoutreference effect and an upper bound of discount percentage within the two periods. Next, we study the duopolyscenario in which substitution effect among multiple firms coexists with reference effect. Interestingly, we findthat the two effects have distinct impacts on the price of the product. Concisely, competition effect affects theprice in a vertical way, where the price base (traditional price without reference effect) is decreasing incompetition intensity, and reference effect affects the price in a lateral way, where the additive component of theprice is increasing (decreasing) in reference intensity in the first (second) period. Overall, the competition willreduce a firm’s profit. However, the reference effect will increase a firm’s profit.
关键词：reference effect; competitive intensity; dynamic pricing; two periods; discount percentage.
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