In this chapter we review two distinct streams of literature, the numerical cognition literature and the judgment and decision making literature, to understand the psychological mechanisms that underlie consumers' responses to prices. The judgment and decision making literature identifies three...

Economic price theory assumes that consumers’ responses to prices can be characterized by stable demand curves and price elasticities. The author posits that this assumption lacks descriptive validity because the demand curve is rather unstable; subtle changes in framing and contextual cues can...