The impact of reference price effect on pricing decisions
Asia Pacific Journal of Marketing and Logistics
ISSN: 1355-5855
Article publication date: 22 November 2023
Abstract
Purpose
The paper attempts to discuss the impact of reference price effect on pricing decisions.
Design/methodology/approach
With the growth of the Internet and e-commerce, more and more customers purchase products in through online channels and choose products by comparing different prices and services, and the reference price effect has an impact on pricing decisions. To investigate the impact of consumers' reference price effect on the dual-channel supply chain, the authors establish a basic model consisting of a single dominant manufacturer and a single downstream retailer, and analyze the optional decisions under different situations and discuss the influence of reference price effect. Finally, a number case verifies the validity and rationality of the proposed model.
Findings
The results show that (1) the reference price effect has varying effects on the price, channel demand and income of manufacturers and retailers in the channel depending on the role of customers' channel preferences. (2) The manufacturer's online channel demand and profits always increase with the reference pricing effect, whereas the retailer's offline demand and profits always decline. (3) When the proportion of consumers preferring offline is higher, the manufacturer's network price and wholesale price increase with the reference price effect, while the retailer's retail price decreases with the reference price effect; when the proportion of consumers preferring offline is lower, the opposite is true, and the centralized decision results are consistent with the decentralized decision results.
Practical implications
This paper can clarify the impact of consumer reference price effects on the operation of dual-channel supply chains, and help inform pricing decisions of manufacturers and retailers in dual-channel supply chains.
Originality/value
The proposed approach can well analyze the impact of consumer reference price effect and give channel their optional decisions.
Keywords
Acknowledgements
This work is partially funded by the National Natural Science Foundation of China (Nos: 71503103 and 72372059); the National Social Science Foundation of China (Nos: 19FGLB031 and 22AJL002); Outstanding Youth in Social Sciences of Jiangsu Province; Qinglan Project of Jiangsu Province and the Fundamental Research Funds for the Central Universities (Nos: JUSRP622047 and JUSRP321016, the Tender Project from Wuxi Federation of Philosophy and Social Sciences (No: WXSK23-A-03) and the Soft Science Foundation of Wuxi city (No: KX-23-A01). This work does not involve any conflict of interest.
Citation
Wang, C.-h., Liu, Y. and Pan, Z.-y. (2023), "The impact of reference price effect on pricing decisions", Asia Pacific Journal of Marketing and Logistics, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/APJML-07-2023-0685
Publisher
:Emerald Publishing Limited
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