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There is a psychological theory that states that people for perceptions based on present and past stimuli (Helson, 1964). This has been extended by marketing academics to include the concept of reference pricing. They do this by stating that consumers, based on ....

Middle of Essay
.... by consumers to assess the value of an item. Examples of these reference prices include reduced promotional prices and a competitor's price (Biswas, Wilson & Licata, 1993). The second major type of reference price is the internal reference price. These exist in the consumer's mind as either a point or a range of points (Putler, 1992). In either case, the reference price is used to evaluate the value of a price under consideration. The concept of the reference price is consistent with a number of psychological theories including adaptation level theory and assimilation-contrast theory (Kalyanaram & Winer, 1995). Two important sides to the referen ....