Two Essays on the Marketing of Durable Goods

Two Essays on the Marketing of Durable Goods

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Essay 2. A Model of Markets with Resale and Reference Dependent Consumers. This essay seeks to add to an emerging stream of literature that incorporates behavioral biases observed in experimental settings into formal economic models to understand their impact upon marketplace outcomes. One of the most robust empirical findings to emerge from experimental studies in psychology is that agents judge outcomes with respect to a reference point. We incorporate this notion of reference dependence into a formal model of markets with resale and examine how producer behavior and market outcomes change when agents care for reference utility. The introduction of reference dependence utility in our model lets us recover the qendowment effectq formally. Our analysis reveals that producer profit falls as consumers become more sensitive to reference utility. This result stands in contrast to most of the recent work in behavioral economics that suggests that producers gain from the biases of a boundedly rational consumer.the deterioration measure (Porter and Sattler 1999). ... While Honda Civic and Ford Explorer have relatively smooth price declines (and hence lower values for deterioration), price ... We obtained the used car prices from Kelleya#39;s Blue Books.

Title:Two Essays on the Marketing of Durable Goods
Author:Raghunath Singh Rao
Publisher:ProQuest - 2007


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