Reference pricing (RP) theories predict different outcomes when reference prices are fixed (exogenous) versus being a function of market prices (MPs) (endogenous). Exogenous RP results in MPs at both high-price and low-price firms converging towards the reference price from above and below, respectively. Endogenous RP results in MPs at both high-price and low-price firms decreasing, with low-pr...

Large-scale datasets of consumer behavior might revolutionize the way we gain competitive advantages and increase our knowledge in the respective domains. At the same time, valuable datasets pose potential privacy risks that are difficult to foresee. In this paper we study the impact that the prices from consumers’ purchase histories have on the consumers’ location privacy. We show that using a...

It has become an article of faith that the “invisible hand” of the free market sets prices with the collective wisdom of the body of traders. The success of the free market in providing stable consumer prices has enhanced the confidence in this idea. Within a very abstract sense, the price theory of consumer goods is similar to that of financial assets. Both are set by supply and demand for the...

Recent IT research has analyzed how the performance of IT-enabled markets may differ from conventional markets. This literature has made two unexpected empirical findings. First, ITenabled markets for commodity goods exhibit significant price dispersion. Second, well-known retailers in these markets appear to cooperate to set high prices. This paper presents an analytic model, and confirmatory ...

Japan's rice sector is supported by high prices paid by consumers that allow many farm households to maintain small rice farms. Japan's government controls trade within a tariff-rate quota and imposes a prohibitively high tariff on imports outside the quota. Within Japan, diversion programs pay farmers to substitute other crops for rice since, without government-mandated diversion, supply would...

We introduce consumer loss aversion into the Salop (1979) model of price competition with differentiated products. Firms face uncertain costs of production, and after observing their own cost realizations simultaneously set prices. A consumer derives “gain-loss utility” from comparing the purchase price and her satisfaction with the acquired product to her recent expectations regarding the same...

Recent managerial evidence and academic research has suggested that consumer decisions are influenced not only by the prices of individual items but also by a retailer's price image, which reflects a consumer's impression of the overall price level of a retailer. Despite the increasing importance of price image in marketing theory and practice, existing research has not provided a clear picture...

The impact of a reform that increased consumer information on brand name and generic pharmaceutical prices is analyzed both theoretically and empirically. The theoretical results show that an increase in information likely reduces the price of brand name pharmaceuticals, while the results regarding generics are less clear. In the empirical part of the paper, the introduction of the substitution...

A monopolist produces a good with two qualities. All consumers have the same valuation of the first quality, but their valuations of the second vary, and are their private information. A public agency can verify qualities, and make credible reports to consumers. In Full Quality Report, the public agency reports both qualities. In Average Quality Report, it reports a weighted average of qualitie...

Traditionally, policymakers and financial markets have regarded the “core” consumer price index (CPI) as a key inflation indicator. The core CPI, a special index published by the Bureau of Labor Statistics (BLS), excludes the volatile prices of food and energy. In excluding these components, BLS recognizes that prices that swing dramatically in response to unusual shifts in weather and other un...