Firm Behavior Under Consumer Loss Aversion

Seoul Journal of Economics 27 (No. 2 2014) 171-186

16 Pages Posted: 15 Jul 2014

See all articles by Sang-Hyun Kim

Sang-Hyun Kim

University of East Anglia (UEA)

Jihong Lee

Seoul National University

Date Written: May 30, 2014

Abstract

This survey aims to provide an overview of recent developments in the industrial organization literature that explores the behavior of profit-maximizing firms facing consumers with reference-dependent preferences and loss aversion. We discuss the implications of loss aversion on the practice of price discrimination, product differentiation, and incentive provision, among others. A common theme is emerging from these studies: consumer loss aversion may serve to limit the benefits from complex firm strategies that depend on the realizations of uncertainty.

Keywords: Survey, Reference-dependent preferences, loss

JEL Classification: D03, D21, D42, D43, L12, L13, M52

Suggested Citation

Kim, Sang-Hyun and Lee, Jihong, Firm Behavior Under Consumer Loss Aversion (May 30, 2014). Seoul Journal of Economics 27 (No. 2 2014) 171-186, Available at SSRN: https://ssrn.com/abstract=2466284

Sang-Hyun Kim

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Jihong Lee (Contact Author)

Seoul National University ( email )

Department of Economics
Seoul, 151-742
Korea, Republic of (South Korea)

HOME PAGE: http://sites.google.com/site/jihong33/

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