Pricing when customers have loss aversion and limited attention

Ying Li; Jian Cao; Yongjiang Guo; Ying Li; Jian Cao; Yongjiang Guo

doi:10.3934/jimo.2026021

Journal of Industrial and Management Optimization

2026, Volume 22, Issue 1: 554-580. doi: 10.3934/jimo.2026021

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Pricing when customers have loss aversion and limited attention

1.
School of Mathematical Sciences, Beijing University of Posts and Telecommunications, Beijing, 100876, China
2.
Key Laboratory of Mathematics and Information Networks (Beijing University of Posts and Telecommunications), Ministry of Education, Beijing, 100876, China
3.
School of Applied Mathematics, Nanjing University of Finance and Economics, Nanjing, Jiangsu, 210023, China

Received: 27 June 2025 Revised: 24 October 2025 Accepted: 06 November 2025 Published: 16 December 2025
91A20, 91A05

We investigate the optimal pricing problem for a seller who provides a single product to customers characterized by loss aversion and limited attention. We fully examine the interactive impacts of these two characteristics on pricing strategies. Our findings indicate that the seller's pricing strategy critically depend on the customers' reference point and limited attention. The analysis reveals several counterintuitive findings: for instance, the high-quality seller's revenue exhibits a non-monotonic relationship with information cost, while the negative impact of loss aversion only appears when the reference point is high. These findings provide clear strategic guidance: The high-quality seller must commit to information transparency to demonstrate its quality, while also establishing a favorable reference point and reducing the negative impact of loss aversion through reliable guarantees. Conversely, the low-quality seller should leverage information obfuscation and anchor a lower reference point to maximize revenue. This study offers systematic analytical tools for understanding sellers' strategies in complex environments and lays a solid foundation for future theoretical development.
- uncertain quality,
- pricing,
- loss aversion,
- limited attention,
- information cost
Citation: Ying Li, Jian Cao, Yongjiang Guo. Pricing when customers have loss aversion and limited attention[J]. Journal of Industrial and Management Optimization, 2026, 22(1): 554-580. doi: 10.3934/jimo.2026021

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Abstract

We investigate the optimal pricing problem for a seller who provides a single product to customers characterized by loss aversion and limited attention. We fully examine the interactive impacts of these two characteristics on pricing strategies. Our findings indicate that the seller's pricing strategy critically depend on the customers' reference point and limited attention. The analysis reveals several counterintuitive findings: for instance, the high-quality seller's revenue exhibits a non-monotonic relationship with information cost, while the negative impact of loss aversion only appears when the reference point is high. These findings provide clear strategic guidance: The high-quality seller must commit to information transparency to demonstrate its quality, while also establishing a favorable reference point and reducing the negative impact of loss aversion through reliable guarantees. Conversely, the low-quality seller should leverage information obfuscation and anchor a lower reference point to maximize revenue. This study offers systematic analytical tools for understanding sellers' strategies in complex environments and lays a solid foundation for future theoretical development.

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