Behavioral Issues in Pricing Management

Psychological and emotional concerns are integral parts of human decision making, and thus important driving factors for the efficiency of economic systems full of human agents. This book chapter describes how these concerns induce human decisions that deviate from the predictions of neoclassical economic theories, and how such deviations affect pricing management in both areas of consumer pricing and pricing contracts among firms. We discuss an extensive spectrum of recent findings in behavioral economics, especially in a pricing context, and elaborate on the implications of these behavioral regularities for pricing strategies.