We propose a new reference price framework for brand choice. In this framework, we employ a Markov-switching process with an absorbing state to model unobserved price recall of households. Reference prices result from the prices households are able to remember. Our model can be used to learn how...

Considerable theoretical justification for consumers' use of psychological reference points exists from the research literature. From a managerial perspective, one of the most important applications of this concept is reference price, an internal standard against which observed prices are...

This paper investigates the impact of political shocks (positive and negative) on financial markets. Using data from Pakistan for the period January 1999 to September 2006, we link ‘a’ political event to the financial market volatility. We use high frequency data from three indicators...

This paper analyzes a maximum price system and a reference price system in a vertical differentiation model with a brand-name drug and a generic. In particular, both instruments are compared with respect to their performance in reducing public expenditure, limiting financial exposure of...

The firms in this model set non-binding list prices before competing for buyers by non-cooperatively granting discounts. Each firm has an incentive to set a high list price if, for example, the customers anchor their willingness-to-pay on the list price. However, list price competition occurs if...