Competition under Consumer Loss Aversion

Arbeitspapier

We address the effect of contextual consumer loss aversion on firm strategy in imperfect competition. Consumers are fully informed about match value and price at the moment of purchase. However, some consumers are initially uninformed about their tastes and form a reference point consisting of an expected match—value and price distribution, while others are perfectly informed all the time. We show that, in duopoly, a larger share of informed consumers leads to a less competitive outcome if the asymmetry between firms is sufficiently large and that narrowing the set of products which consumers consider leads to a more competitive outcome.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper Series ; No. 12-8

Classification and Topics

• Classification: Wirtschaft ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Oligopoly and Other Imperfect Markets ; Monopolization; Horizontal Anticompetitive Practices ; Advertising
• Subject: Contextual loss aversion ; reference-dependent utility ; behavioral industrial organization ; imperfect competition ; product differentiation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karle, Heiko ; Peitz, Martin
• Event: Veröffentlichung
• (who): University of Mannheim, Department of Economics
• (where): Mannheim
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/129527
• URN: urn:nbn:de:bsz:180-madoc-316425
• Last update: 10.03.2025, 11:43 AM CET