| dc.description.abstract | In the reality, there has more competition in the market, which change the customers’ purchase behavior rapidly. We construct a model to sell a product during a fixed selling period for compete suppliers. In our study, we use the reference price function to present the customers utility distribution. The concept of a reference price asserts that consumers make decisions based on both actual and perceived prices. We incorporate the term ＂reservation price＂ to refer to these internal reference price levels and “selling price” to refer to these external reference price levels for finding that how reference prices affect the customer’s perceptions of the product.
We model the customer’s utilities of the product, proposed a model that reference price distribution is affected by price. In this paper, two models are developed to describe and illustrate how the customers’ reference price change in the competition. In model 1, suppose we are the entrants of specific product market, we find out that the total profit of specific market will decrease and customers’ reference prices will decrease, too. Moreover, discount activity is a good way to increase customers’ perception of product in short-term. Besides, we apply model 2 to realize how the competition affect customers’ reference price when the common brand and the luxury brand in the different market respectively and in the same market. The customers’ reference prices in different brands will influence each other.
The contribution to the pricing literature is two fold. First, the relationship between reference prices and customer’s perceptions of the product has not been modeled and estimated in previous literature and we do so in this paper. Second, we believe our results have implications for retail managers. Modeling the impact of reference prices enables retailers to better manipulate the perceived transaction value—that is, the pleasure buyers get from taking advantage of a price deal.
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