NDLI: Price and quality competition in a duopoly with reference-dependent preferences

Content Provider	IEEE Xplore Digital Library
Author	Qian Liu Song Zheng
Copyright Year	2010
Description	Author affiliation: Department of Industrial Engineering and Logistics Management, Hong Kong University of Science and Technology (Qian Liu; Song Zheng)
Abstract	Research in marketing and psychology shows that customers exhibit reference-dependent preferences, which means the relative standing of a product in a choice set will affect its utility. Consequently, this reference dependency will affect the firms' decision on the price and quality. In particular, we study a model of two firms offering differentiated products in a covered duopoly market. They simultaneously choose the quality of the product and then compete in price. Customers decide which firm to purchase from based on a general utility function comprised of the standard consumption utility and the comparative utility which captures the reference-dependent value. We investigate the optimal pricing and quality decisions for each firm under the reference dependency effect. We also study the impact the reference dependency has on market share and profit of each firm. The goal of this paper attempts to fill the gap between our understanding of the reference-dependent behavior of customers and the firm's quality differentiation strategy.
Starting Page	1
Ending Page	4
File Size	82328
Page Count	4
File Format	PDF
ISBN	9781424464852
e-ISBN	9781424464876
DOI	10.1109/ICSSSM.2010.5530146
Language	English
Publisher	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Publisher Date	2010-06-28
Publisher Place	Japan
Access Restriction	Subscribed
Rights Holder	Institute of Electrical and Electronics Engineers, Inc. (IEEE)
Subject Keyword	Technology management Engineering management Duopoly Psychology Pricing Industrial engineering Cost function Marketing management Game theory Quality management Logistics Reference-Dependent preferences
Content Type	Text
Resource Type	Article

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