Competitive strategy when consumers are affected by reference prices

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4 Scopus citations


The article presents a model that analyzes the optimal strategy of multi-product firms when consumers are affected by reference prices. Generally, the stronger the consideration of reference prices is, the more intensified the competition is and the lower are the prices and profits. In some cases it becomes optimal to sell the good for which consideration of reference prices is stronger at a negative markup. The model offers several practical implications, for example, suggesting that firms should usually avoid focusing advertisements on the price differences between the firm and its competitors.

Original languageEnglish
Pages (from-to)327-340
Number of pages14
JournalJournal of Economic Psychology
StatePublished - 1 Dec 2013


  • Behavioral economics
  • Competitive strategy
  • Loss leaders
  • Multi-product firms
  • Reference prices
  • Retailing

ASJC Scopus subject areas

  • Applied Psychology
  • Sociology and Political Science
  • Economics and Econometrics


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