The Pricing Decisions Based On Consumer Psychology

Pricing is one of firms’fundamental marketing decisions, such as the launching price for new product, the rise of price, the fall of price. In addition, from consumers’ perspective, their purchase decisions can be affected by their past purchase experience or psychological factor, such as, mental accounting, variety seeking, reference price effect etc. These consumer psychologies have influence on firms’sales and profits indirectly. However, firms usually ignore consumers’psychologies when making price decisions. Based on this, we try to explore the effect of consumer psychologies on firms’pricing decisions.Deriving from the pricing practices in the real market and utilizing differential game theory and self-select constrain, we analyze the optimal decisions of firms in different framework. Firstly, Chapter3studies the new style launching strategy of fashion product with the consideration of mental accounting effect. Utilizing a two-period pricing model and introduce three launching strategies for fashion products, including the N-Strategy, the S-Strategy and the D-Strategy. We derive the firm’s optimal pricing decisions under the three different strategies, then compare the optimal profits for the three different strategies to illustrate in which condition the firm should utilize them. Secondly, Chapter4investigates the new style launching strategy of experience good with the concern of variety seeking. Utilizing the similar framework, we first analyze the impact of variety seeking on the firm’s launching price and discount rate under three possible strategies, then explore in which condition the firm should utilize them by comparing the optimal profits for the three different strategies. Thirdly, Chapter5investigates the market segmentation of two competitive firms while concerning consumers’variety seeking effect. Utilizing a two-period model, we show that consumers’variety seeking behavior can decrease firms’second-period price and may even force firms to exit the market. To alleviate the negative effect of variety seeking, we propose a strategy that the two firms exchange their targeted markets in periods, and the result show that this strategy can achieve a pareto improvement in a certain condition. Fourth, we analyze the effect of reference price on the equilibrium price and advertising effort in duopoly. Deriving from the advertising practice in real market and with the consideration of consumers’ strategic behavior, we propose two policies which is advertising commitment and price commitment, the reference price can be affected by the retail price and the advertising effort. In a two-period model, we investigate the impact of reference price on two firms’equilibrium price and advertising effort, then explore in which condition the firm should utilize which policy through simulation examples.The innovations and contributions of this thesis are briefly summarized as follows:(1) Contents of the thesis are derived from the pricing practices; the research background of pricing is enriched. Various practical issues are modeled and analytical solutions are obtained. Therefore, the thesis contributes to the theoretical of pricing.(2) The thesis firstly considers the effect of mental accounting on the launching strategy of fast fashion product.(3) The thesis firstly considers the effect of variety seeking on the launching strategy of experience goods.(4) The thesis firstly considers the effect of variety seeking on market segmentation in heterogeneously market.(5) The thesis considers the effect of advertising on the reference price, which can provide better guidance and suggestions for the marketing strategy of enterprises.