Difference between revisions of "Reference price"

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Latest revision as of 21:58, 21 March 2009

This article describes a pricing strategy used by sellers, typically in markets that suffer from imperfect competition, significant transaction costs or imperfect information.
View other pricing strategies

Definition

A reference price is a strategy where a particular good or service being sold is made to look more attractive in terms of price by placing it next to a more expensive alternative. Here, the price of the expensive alternative serves as a reference price for the good to be sold.

Reference prices are explained by behavioral economists in terms of anchoring and isolation effects.