Dynamic pricing with loss-averse consumers and peak-end anchoring

Operations Research

Volumn 59, Issue 6, 2011, Pages 1361-1368

  Nasiry, Javad ^a   Popescu, Ioana ^b  

^a HONG KONG UNIVERSITY OF SCIENCE AND TECHNOLOGY   (Hong Kong)

^b INSEAD   (Singapore)

Author keywords

Behavioral pricing; Dynamic pricing; Dynamic programming; Peak end rule; Prospect theory

Indexed keywords

ADVERSE EFFECT; DYNAMIC PRICING; LOSS AVERSION; LOWEST PRICE; PEAK-END RULE; PRICE MECHANISM; PRICING POLICY; PROSPECT THEORY; TRANSIENT REGIME; WEIGHTED AVERAGES;

BEHAVIORAL RESEARCH; DYNAMIC PROGRAMMING; OPTIMIZATION; PROFITABILITY;

COSTS;

EID: 84855322904     PISSN: 0030364X     EISSN: 15265463     Source Type: Journal    
DOI: 10.1287/opre.1110.0952     Document Type: Article

References (31)

1. Çelik, S., A. Moharremoghlu, S. Savin. 2009. Revenue management with costly price adjustments. Oper. Res. 57(5) 1206-1219.
2. Chang, K., S. Siddarth, C. B. Weinberg. 1999. The impact of heterogeneity in purchase timing and price responsiveness on estimates of sticker shock effects. Marketing Sci. 18(2) 178-192.
3. Fibich, G., A. Gavious, O. Lowengart. 2003. Explicit solutions of optimization models and differential games with nonsmooth (asymmetric) reference-price effect. Oper. Res. 51(5) 721-734.
4. Fredrickson, B. L. 2000. Extracting meaning from past affective experiences: The importance of peaks, ends and specific emotions. Cognition and Emotion 14(4) 577-606. (Pubitemid 30429314)
5. Fredrickson, B. L., D. Kahneman. 1993. Duration neglect in retrospective evaluations of affective episodes. J. Personality Soc. Psych. 65(1) 45-55.
6. Gallego, G., G. van Ryzin. 1994. Optimal dynamic pricing of inventories with stochastic demand over finite horizons. Management Sci. 40(8) 999-1020.
7. Gaur, V., Y. H. Park. 2007. Asymmetric consumer learning and inventory competition. Management Sci. 53(2) 227-240. (Pubitemid 46326177)
8. Ho, T.-H., J. Zhang. 2008. Designing pricing contracts for boundedly rational customers: Does the framing of the fixed fee matter? Management Sci. 54(4) 686-700.
9. Kahneman, D. 2000. Evaluation by moments: Past and future. D. Kahneman, A. Tversky, eds. Choices, Values and Frames. Cambridge University Press, New York, 693-708.
10. Kahneman, D., B. L. Fredrickson, C. A. Schreiber, D. A. Redelmeier. 1993. When more pain is preferred to less: Adding a better end. Psych. Sci. 4(6) 401-405.
11. Kalyanaram, G., R. S. Winer. 1995. Empirical generalizations from reference price and asymmetric price response research. Marketing Sci. 14(3) G161-G169.
12. Kopalle, P. K., A. G. Rao, J. L. Assuncao. 1996. Asymmetric reference price effects and dynamic pricing policies. Marketing Sci. 15(1) 60-85.
13. Krishnamurthi, L., T. Mazumdar, S. P. Raj. 1992. Asymmetric response to price in consumer brand choice and purchase quantity decisions. J. Consumer Res. 19(3) 387-400.
14. Liu, Q., G. van Ryzin. 2011. Strategic capacity rationing when customers learn. Manufacturing Service Oper. Management 13(1) 89-107.
15. Loch, C. H., Y. Wu. 2007. Behavioral operations management. Foundation and Trendsò in Tec., Inform. Oper. Management 1(3) 121-232.
16. Lowengart, O. 2002. Reference price conceptualisations: An integrative framework of analysis. J. Marketing Management 18(1) 145-171.
17. Mazumdar, T., S. P. Raj, I. Sinha. 2005. Reference price research: Review and propositions. J. Marketing 69(4) 84-102. (Pubitemid 41504940)
18. Nasiry, J. 2010. Pricing and revenue management with behavioral considerations. Ph.D. dissertation, Technology and Operations Management Area, INSEAD, Fontainebleau, France.
19. Niedrich, R. W., S. Sharma, D. H. Wedell. 2001. Reference price and price perceptions: A comparison of alternative models. J. Consumer Res. 28(3) 339-354. (Pubitemid 33403463)
20. Nwokoye, N. G. 1975. Subjective judgments of price: The effects of price parameters on adaptation levels. Proc. Fall Conf., American Marketing Association, Chicago.
21. Ovchinnikov, A., J. Milner. 2011. Revenue management with end-ofperiod discounts in the presence of customer learning. Production Oper. Management, ePub ahead of print June 20.
22. Popescu, W., Y. Wu. 2007. Dynamic pricing strategies with reference effects. Oper. Res. 55(3) 413-429.
23. Rabin, M. 1998. Psychology and economics. J. Econom. Literature 36(1) 11-46. (Pubitemid 128461584)
24. Rajendran, K. N., G. J. Tellis. 1994. Contextual and temporal components of reference price. J. Marketing 58(1) 22-34.
25. Stokey, N. L., R. E. Lucas, E. C. Prescott. 1989. Recursive Methods in Economic Dynamics. Harvard University Press, Cambridge, MA.
26. Su, X. 2007. Intertemporal pricing with strategic customer behavior. Management Sci. 53(5) 726-741. (Pubitemid 351159635)
27. Thaler, R. H. 1985. Mental accounting and consumer choice. Marketing Sci. 4(3) 199-214.
28. Topkis, D. M. 1998. Supermodularity and Complementarity. Princeton University Press, Princeton, NJ.
29. Tversky, A., D. Kahneman. 1991. Loss aversion in riskless choice: A reference dependent model. Quart. J. Econom. 106(4) 1039-1061.
30. Wall Street Journal. 2010. All things digital: Book publishers beware! At iTunes, expensive music equals slower sales. (February 9).
31. Xia, L., K. B. Monroe, J. L. Cox. 2004. The price is unfair! A conceptual framework of fairness perceptions. J. Marketing 68(4) 1-15. (Pubitemid 39508307)