"Violations of rational choice principles in pricing decisions"

"We are interested in how customer purchase decisions exhibit behavioral patterns that are inconsistent with rational choice models. As we will see, violations of rational choice can take many forms: demand that increases with price increases, choices that are influenced by the addition of irrelevant options, preferences that are unstable, and a willingness to pay that is fluid and subject to contextual influences. In this context we thus summarize how firms can influence customer perceptions of value and price without changing the price. Second is the manager. Managers set prices and in this process are equally susceptible to violating fundamental principles of rational choice. These violations can take the following forms: conformity bias, competition neglect, competitor obsession, simple heuristics, and underpricing for new product introductions.
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This refers to the tendency to pursue competitor-oriented goals—such as market share—to the detriment of one's own profitability. When comparative profits are provided, managers show a consistent tendency to price below optimal levels in order to hurt competition, as opposed to maximizing their own profits. Field studies suggest that competitor orientation and market share goals are detrimental to profitability. ...  “The use of market share as a measure of corporate or executive performance is at best a waste of time; at worst, it is totally misleading. We recommend that you never make the market share calculation. If you emphasize competitive goals, you are letting the competition define your business and its success.” Competitor obsession leads to lower prices and lower profits. This effect is well documented in industrial markets.

Trechos retirados de "Violations of rational choice principles in pricing decisions" de Andreas Hinterhuber

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"Why did Apple push the limits of pricing on the highly anticipated device? A key reason involves using a premium price to set an expectation of excellence in consumers’ minds."

Trecho retirado de "The Psychology Behind the New iPhone’s Four-Digit Price"