We develop a theory of imperfect competition with loss-averse consumers. All consumers are fully informed about match value and price at the time they make their purchasing decision. However, a share of consumers are initially uncertain about their tastes and form a reference point consisting of...

We consider product markets in which consumers are interested only in a specific product category and initially do not know which product category matches their tastes. Using sophisticated tracking technologies, an intermediary can make inferences about a consumer's preferred product category...

We consider a market with two symmetric firms and two asymmetric consumer groups. Firms send advertising messages which inform consumers about the existence and the price of their product (Butters, 1977). Targeting a specific consumer is imperfect as with some probability the consumer is not...

The so called flat-rate bias is a well documented phenomenon caused by consumers' desire to be insured against fluctuations in their billing amounts. This paper shows that expectation-based loss aversion provides a formal explanation for this bias. We solve for the optimal two-part tariff when...

We consider a model of firm pricing and consumer choice, where consumers are loss averse and uncertain about their future demand. Possibly, consumers in our model prefer a flat rate to a measured tariff, even though this choice does not minimize their expected billing amount - a behavior in line...