The article presents a model that analyzes the optimal strategy of multi-product firms when consumers are affected by reference prices. Generally, the stronger the consideration of reference prices is, the more intensified the competition is and the lower are the prices and profits. In some...

Consumers often have to decide whether to make an effort and go to a remote store rather than a nearby one in order to obtain a lower price. Only the absolute price difference between the stores should be relevant in this case, but several experiments showed that people exhibit "relative...

The article presents experimental evidence that shows that people often consider relative price differences in addition to absolute differences when choosing between substitute goods. Because the choice between substitute goods is a very common one, this is an important finding. The experiment...

Tipping is an important economic phenomenon, involving about $47 billion a year in the US food industry alone, and trillions of dollars across different occupations and countries over the years. Moreover, tipping is a major source of income for millions of workers. This article discusses the...

According to construal level theory (CLT) [Trope, Y., & Liberman, N. (2003). Temporal construal. Physical Review, 110, 403-421], psychological representation of information depends on "psychological distance", that is, on whether the relevant information refers to the near or distant...