When buyers also sell: The implications of pricing policies for customer satisfaction

In certain purchase situations, such as when a new car is purchased and an old vehicle is traded in, individuals simultaneously play the role of buyers and sellers. It is interesting to observe that, when evaluating the purchase and selling prices of the new and old products respectively, such consumers often fail to behave rationally. For example, a discount on the price of the new commodity and an equivalent markup on the old product will be weighted differently. This empirical phenomenon can be analyzed with the aid of the prospect theory - an approach based on the descriptive decision theory. This theory facilitates the elaboration of decision-making rules for determining the optimum pu…