Prospect theory and pricing decisions Article

Urbany, JE, Dickson, PR. (1990). Prospect theory and pricing decisions . Journal of Behavioral and Experimental Economics, 19(1), 69-80. 10.1016/0090-5720(90)90018-3

cited authors

  • Urbany, JE; Dickson, PR

abstract

  • Kahneman and Tversky's well-known prospect theory predicts that decision-makers will predominantly take the sure thing when choosing between a sure gain and a risky gain of equal or better expected value. We find that, when a price cut decision is presented in a form similar to the prospect theory gamble problems, the majority of respondents (both students and retailers) choose the risky price cut choice, even when the risky choice has a lower expected value. The explanation that perceived short term gains in volume (i.e., the customer base) dominated the price cut decision is examined in detail. © 1990.

authors

publication date

  • January 1, 1990

published in

Digital Object Identifier (DOI)

start page

  • 69

end page

  • 80

volume

  • 19

issue

  • 1