Dynamic Pricing with Loss Averse Consumers and Peak-End Anchoring

  title={Dynamic Pricing with Loss Averse Consumers and Peak-End Anchoring},
  author={Javad Nasiry and Ioana Popescu},
  journal={INSEAD: Decision Science (Topic)},
We study the dynamic pricing implications of a new, behaviorally motivated reference price mechanism based on the peak-end memory mode. This model suggests that consumers anchor on a reference price that is a weighted average of the lowest and most recent prices. Loss-averse consumers are more sensitive to perceived losses than gains relative to this reference price. We find that a range of constant pricing policies is optimal for the corresponding dynamic pricing problem. This range is wider… 
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