The information content of prices. A preliminary model for estimating buyer response

Research output: Contribution to journalArticlepeer-review

Abstract

An understanding of buyer response to price depends upon determining how buyers perceive price. One hypothesis is buyers have an acceptable range of prices and, therefore, the demand curve is backward bending. This article presents an argument for a new research methodology for estimating buyersresponses to price. The potential applicability of the Weber- Fechner Law of physchophysics for exploring the price- quality relationship is analyzed. Given the desire to express demand as a logarithmic function of price, the lognormal distribution is used to explore the ramifications of the relationship. Finally, the method of profit analysis is developed for obtaining demand estimates.

Original languageEnglish (US)
JournalManagement Science
Volume17
Issue number8
StatePublished - Apr 1971
Externally publishedYes

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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