33 research outputs found
Reference Distorted Prices
I show that when consumers (mis)perceive prices relative to reference prices,
budgets turn out to be soft, prices tend to be lower and the average quality of
goods sold decreases. These observations provide explanations for decentralized
purchase decisions, for people being happy with a purchase even when they have
paid their evaluation, and for why trade might affect high quality local firms
'unfairly'