Advances in Economics, Management and Political Sciences
- The Open Access Proceedings Series for Conferences
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
Series Vol. 62 , 28 December 2023
Open
Access | Article
Literature Review: The Impact of Consumer Loss Aversion on Pricing Strategies in the Internet Era
* Author to whom correspondence should be addressed.
Abstract
Loss aversion is gaining attention in economic analysis and has implications for the pricing strategies of merchants in this Internet age. Moreover, in the past, there was a particular gap in the research on the relationship between loss aversion and pricing strategies. For this reason, this paper adopts the form of a literature review to review the relevant literature in the past. This review covers studies and related articles on ‘loss aversion’, ‘loss aversion in the Internet era’, ‘pricing policies’ and ‘loss aversion associated with pricing strategies’. This study aims to provide an accurate definition of both by reviewing the literature on loss aversion and pricing policies. By summarizing and analyzing the past literature, the relationship between the two is re-examined to find the intrinsic link that exists between the two. The results of this study identify research gaps in the research area and point out future research directions.
Keywords
loss aversion, pricing strategy, internet era
References
1. Lewis, M. (2016) The undoing project: A friendship that changed the world. Penguin UK.
2. Thaler, R. (1980) Toward a positive theory of consumer choice, Journal of economic behavior & organization, 1(1), 39-60
3. Benartzi, S. and Thaler, R.H. (1995) Myopic loss aversion and the equity premium puzzle, The quarterly journal of Economics, 110(1), 73-92.
4. Samuelson, W. and Zeckhauser, R. (1988) Status quo bias in decision making, Journal of risk and uncertainty, 1, .7-59.
5. Putler, D.S. (1992) Incorporating reference price effects into a theory of consumer choice, Marketing science, 11(3), 287-309.
6. Hardie, B.G., Johnson, E.J. and Fader, P.S. (1993) Modeling loss aversion and reference dependence effects on brand choice, Marketing science, 12(4), 378-394.
7. Tversky, A. and Kahneman, D. (1979) Prospect theory: An analysis of decision under risk, Econometrica, 47(2), 363-391.
8. Tversky, A. and Kahneman, D. (1992) Advances in prospect theory: Cumulative representation of uncertainty, Journal of Risk and uncertainty, 5, 297-323.
9. Tversky, A. and Kahneman, D. (1991) Loss aversion in riskless choice: A reference-dependent model, The quarterly journal of economics, 106(4),1039-1061.
10. Rabin, M. (1998) Psychology and economics, Journal of economic literature, 36(1),11-46.
11. Novemsky, N. and Kahneman, D.(2005) The boundaries of loss aversion, Journal of Marketing research, 42(2), 119-128.
12. Schmidt, U. and Zank, H. (2005) What is loss aversion?, Journal of risk and uncertainty, 30, 157-167.
13. Gächter, S., Johnson, E.J. and Herrmann, A. (2022) Individual-level loss aversion in riskless and risky choices, Theory and Decision, 92(3-4), 599-624.
14. Gal, D. and Rucker, D.D. (2018) The loss of loss aversion: Will it loom larger than its gain?, Journal of Consumer Psychology, 28(3),497-516.
15. Harinck, F., Van Dijk, E., Van Beest, I. and Mersmann, P. (2007) When gains loom larger than losses: Reversed loss aversion for small amounts of money, Psychological science, 18(12), 1099-1105.
16. Andersson, O., Holm, H.J., Tyran, J.R. and Wengström, E. (2016) Deciding for others reduces loss aversion, Management Science, 62(1),29-36.
17. Hsu, C.L., Chen, M.C., Chang, K.C. and Chao, C.M. (2010) Applying loss aversion to investigate service quality in logistics: A moderating effect of service convenience, International Journal of Operations & Production Management, 30(5), 508-525.
18. Ma, S., Lin, J. and Zhao, X. (2016) Online store discount strategy in the presence of consumer loss aversion, International Journal of Production Economics, 171, 1-7.
19. Chang, K.C. and Cheng, Y.S. (2021) How online service recovery reviews influence behavioral intentions in the hospitality context: Regulatory focus and loss aversion perspectives, Journal of Hospitality and Tourism Management, 46, 440-455.
20. Yoon, Y., Polpanumas, C. and Park, Y.J. (2017) The impact of word of mouth via Twitter on moviegoers' decisions and film revenues: Revisiting prospect theory: How WOM about movies drives loss-aversion and reference-dependence behaviors, Journal of Advertising Research, 57(2),144-158.
21. Dolgui, A. and Proth, J.M. (2010) Pricing strategies and models, Annual Reviews in Control, 34(1), 101-110.
22. Kortge, G.D. and Okonkwo, P.A. (1993) Perceived value approach to pricing, Industrial Marketing Management, 22(2), 133-140.
23. Shankar, V. and Bolton, R.N. (2004) An empirical analysis of determinants of retailer pricing strategy, Marketing Science, 23(1), 28-49.
24. Kung, M., Monroe, K.B. and Cox, J.L. (2002) Pricing on the Internet, Journal of Product & Brand Management, 11(5),274-288.
25. PK Kannan, P.K.K. (2001) Dynamic pricing on the Internet: Importance and implications for consumer behavior, International Journal of Electronic Commerce, 5(3), 63-83.
26. Cao, Y., Gruca, T.S. and Klemz, B.R. (2003)Internet pricing, price satisfaction, and customer satisfaction, International Journal of Electronic Commerce, 8(2), 31-50.
27. Levy, M. (2010) Loss aversion and the price of risk, Quantitative Finance, 10(9), \1009-1022.
28. Nasiry, J. and Popescu, I. (2011) Dynamic pricing with loss-averse consumers and peak-end anchoring, Operations research, 59(6), 1361-1368.
29. Courty, P. and Nasiry, J., 2018. Loss aversion and the uniform pricing puzzle for media and entertainment products. Economic Theory, 66, 105-140.
30. Heidhues, P. and Kőszegi, B. (2008) Competition and price variation when consumers are loss averse, American Economic Review, 98(4),1245-1268.
31. Chen, N. and Nasiry, J. (2020) Does loss aversion preclude price variation?, Manufacturing & Service Operations Management, 22(2), 383-395.
32. Wang, Q., Zhao, N., Wu, J. and Zhu, Q. (2021) Optimal pricing and inventory policies with reference price effect and loss-averse customers, Omega, 99, 102174.
33. Sibly, H. (2007) Loss aversion, price and quality, The Journal of Socio-Economics, 36(5), 771-788.
34. Van Oest, R. (2013) Why are consumers less loss averse in internal than external reference prices?, Journal of retailing, 89(1), 62-71.
35. Rosato, A. (2016) Selling substitute goods to loss‐averse consumers: Limited availability, bargains, and rip‐offs, The RAND Journal of Economics, 47(3), 709-733.
36. Ahrens, S., Pirschel, I. and Snower, D.J. (2017) A theory of price adjustment under loss aversion, Journal of Economic Behavior & Organization, 134, 78-95.
37. Hahn, J.H., Kim, J., Kim, S.H. and Lee, J. (2018) Price discrimination with loss averse consumers, Economic Theory, 65, 681-728.
Data Availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Authors who publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open Access Instruction).
- Volume Title
- Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
- ISBN (Print)
- 978-1-83558-225-1
- ISBN (Online)
- 978-1-83558-226-8
- Published Date
- 28 December 2023
- Series
- Advances in Economics, Management and Political Sciences
- ISSN (Print)
- 2754-1169
- ISSN (Online)
- 2754-1177
- DOI
- 10.54254/2754-1169/62/20231324
- Copyright
- 28 December 2023
- Open Access
- This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited