Retailers' control of reference price given product category and level of competition

Authors: Lowengart, Oded; Mizrahi, Shlomo

Source: The International Review of Retail, Distribution and Consumer Research, Volume 11, Number 4, 1 October 2001 , pp. 377-394(18)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This paper examines the conditions that make reference price manipulation beneficial to retailers. The paper offers a modelling approach that is based on two distinct dimensions: product category, and degree of market competition. The model shows that reference price manipulation in a competitive market is less beneficial to retailers than it is in a monopolistic market. Reference price manipulation of a specific product is most advantageous to retailers when it is a frequently purchased, low-priced product in a monopolistic market. For an infrequently purchased, high-priced product in a competitive market, reference price manipulation is less beneficial. The analysis gives rise to policy implications that could potentially improve consumer welfare.

Keywords: CONSUMER WELFARE; MODELLING REFERENCE PRICE; REFERENCE PRICE MANIPULATION

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/713770612

Publication date: October 1, 2001

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