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Firm Behavior under Consumer Loss Aversion
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- Authors
- Issue Date
- 2014-04
- Citation
- Seoul Journal of Economics, Vol.27 No.2, pp. 171-186
- Keywords
- Survey ; Reference-dependent preferences ; Loss aversion ; Personal equilibrium ; Monopoly pricing ; Price discrimination ; Product differentiation ; Agency problem
- Abstract
- This survey aims to provide an overview of recent developments in the industrial organization literature that explores the behavior of profit-maximizing firms facing consumers with reference-dependent preferences and loss aversion. We discuss the implications of loss aversion on the practice of price discrimination, product differentiation, and incentive provision, among others. A common theme is emerging from these studies: consumer loss aversion may serve to limit the benefits from complex firm strategies that depend on the realizations of uncertainty.
- ISSN
- 1225-0279
- Language
- English
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