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Consumer Resistance
Series
Discussion Papers
Type
working paper
Date Issued
2018-02
Author(s)
Abstract
This paper shows that reference-dependent preferences trigger consumer resistance and studies how such consumer behavior impacts pricing and cost communication. We show that consumer resistance reduces the pricing power and profit of the firm. We also show that consumer resistance may provide an incentive for the firm to engage in cost transparency. While cheap communication does not affect consumer behavior, we demonstrate that persuasive communication may increase sales and profit. Finally, we establish that a firm can benefit from operational transparency if cost is monotone increasing in the quality of the production process.
Language
English
Keywords
Reference-dependent preferences
fairness
pricing
cost communication
operational transparency
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Publisher
SEPS
Publisher place
University of St.Gallen, Department of Economics
Number
4-2018
Pages
33
Subject(s)
Eprints ID
254585