Reference price
From Wikipedia, the free encyclopedia
A reference price (RP) is the price that a purchaser announces that it is willing to pay for a good or service. It is used by high-volume purchasers to inform suppliers.[1]
RP requires consumers to have access to price and quality information, which is not general practice in many industries. Further, it does not help consumers with urgent needs, cognitive and/or other impairments.[1]
Reference pricing requires sufficient competition. Otherwise, consumers have no choice about providers, who in turn face less pricing pressure. Reference pricing could encourage lower quality.[1]
"Reference price" in this context is distinct from its use in behavioral pricing scholarship.[2][3][4] In that literature, a "reference price" refers to a mental standard of comparison or a posted statement of "normal" prices used to judge whether an offered price is good deal – as in "Was $100, now $70." Reference prices in this context are related to work by Nobel Prize winner Richard Thaler on "transaction utility" in his theory of mental accounting.[5]