Date of Award
12-1-2020
Degree Type
Thesis
Degree Name
Master of Philosophy (MPHIL)
Discipline
Social Sciences
Department
Economics
First Advisor
Prof. ZHANG Tianle
Second Advisor
Prof. HONG Fuhai
Abstract
This research studies the optimal price charged by a monopoly firm when it is facing reference-dependent consumers (Kőszegi and Rabin, 2006). In the model, a consumer’s total utility from purchasing a good consists of intrinsic utility and gainloss utility, the latter of which is determined by an exogenously determined reference point. The firm’s optimal pricing depends on the level of the reference point. In particular, the firm optimally adopts a gain-type pricing strategy when the reference point is low. In this equilibrium, all consumers who purchase enjoy gain utility (gaintype consumers). When the reference point is high the firm optimally chooses a losstype pricing strategy. In this equilibrium, some consumers who purchase incur loss utility (loss-type consumers). Moreover, the firm’s equilibrium profit decreases when the reference point increases. Finally, I discuss various extensions such as selling cost, participation cost and competition.
Language
English
Copyright
The copyright of this thesis is owned by its author. Any reproduction, adaptation, distribution or dissemination of this thesis without express authorization is strictly prohibited.
Recommended Citation
Leung, H. S. (2020). Selling to reference-dependent consumers (Master's thesis, Lingnan University, Hong Kong). Retrieved from https://commons.ln.edu.hk/otd/116/