sraffa and his arguments against marginism the subtitle of sraffa s most celebrated work production of commodities by means of commodities is prelude to a critique of economic theory given that no later work was ever published by sraffa we are left to wonder what would have come after the prelude this paper suggests that the core of the critique might have been the marginal method itself by carefully distinguishing between published and unpublished work we shows that sraffa s opposition to the marginal method follows several threads some of which were developed over a period of nearly 35 years such as the belief that economic theory should use only measurable and observable magnitudes the critique of the fundamental symmetry between production and consumption and the disagreement with the marshallian concept of equilibrium although none of the arguments reached a stage that sraffa considered satisfactory enough to be worth publishing our reconstruction sheds light on his research programme and on otherwise rather obscure passages in his works

addressing endogeneity in aggregate logit models with time varying parameters for optimal retail pricing abstract it is well known that price endogeneity is a severe problem in demand models for market level data e g aggregate logit models because it leads to biased estimates and therefore incorrect managerial implications if the price parameter varies over time as is usually the case the relevance of the issue increases because standard methods to correct endogeneity biases e g generalized method of moments fail this paper presents a control function approach as a remedy a comprehensive simulation study demonstrates this method s suitability such that addressing endogeneity with the control function approach is the best choice moreover addressing the endogeneity problem incorrectly may be even more harmful than simply ignoring it to further illustrate the control function approach we analyze the demand for canned tuna using aggregate retailer level data here all utility parameters vary over time and price endogeneity is indeed an issue effectively addressing price endogeneity correct has positive economic consequences a normative model analysis reveals that implementing the control function approach yields a 3 increase in retailer profits

investment risks under uncertain climate change policy abstract this paper describes results from a model of decision making under uncertainty using a real options methodology developed by the international energy agency iea the model represents investment decisions in power generation from the perspective of a private company the investments are subject to uncertain future climate policy which is treated as an external risk factor over which the company has no control the aims of this paper are to i quantify these regulatory risks in order to improve understanding of how policy uncertainty may affect investment behaviour by private companies and ii illustrate the effectiveness of the real options approach as a policy analysis tool the study analysed firms investment options of coal and gas fired power plants and carbon capture and storage ccs technologies policy uncertainty is represented as an exogenous event that creates uncertainty in the carbon price our findings indicate that climate policy uncertainty creates a risk premium for power generation investments in the case of gas and coal fired power generation the risk premium would lead to an increase in electricity prices of 5 10 in order to stimulate investment in the case of ccs the risk premium would increase the carbon price required to stimulate investment by 16 37 compared to a situation of perfect certainty the option to retrofit ccs acts as a hedge against high future carbon prices and could accelerate investment in coal plant this paper concludes that to minimise investment risks in low carbon technologies policy makers should aim to provide some long term regulatory certainty

developments in implementable retailing research abstract a favorable image and a convenient location are essential to attract customers into a store possibly with the benefit of retailer advertising once inside the customer s buying decision will be greatly influenced by the products on display their prices and other promotions the ultimate profitability for the retailer will also depend on the efficiency of the operations advances in these areas are reviewed through twenty four publications in the last five years with references back to six earlier papers

when do price thresholds matter in retail categories marketing literature has long recognized that brand price elasticity need not be monotonic and symmetric but has yet to provide generalizable market level insights on threshold based price elasticity asymmetric thresholds and the sign and magnitude of elasticity transitions this paper introduces smooth transition regression models to study threshold based price elasticity of the top 4 brands across 20 fast moving consumer good categories threshold based price elasticity is found for 76 of all brands 29 reflect historical benchmark prices 16 reflect competitive benchmark prices and 31 reflect both types of benchmarks the authors demonstrate asymmetry for gains versus losses on three levels the threshold size and the sign and the magnitude of the elasticity difference interestingly they observe latitude of acceptance for gains compared to the historical benchmark but saturation effects in most other cases moreover category characteristics influence the extent and the nature of threshold based price elasticity while individual brand characteristics impact the size of the price thresholds from a managerial perspective the paper illustrates the sales revenue and margin implications for price changes typically observed in consumer markets

consumer price sensitivity in the retail industry latitude of acceptance with heterogeneous demand abstract estimating the effect of price changes on demand is an essential task for retailers this study proposes a methodology based on consumer utility for modeling the price thresholds phenomenon that allows for threshold asymmetry incorporates consumer heterogeneity and uses weekly aggregated brand level data unlike other studies based on consumer utility models which generate results only for the price elasticity of market share a methodology for estimating price elasticity of demand is also included data on fast moving goods detergents toilet paper soft drinks meats liquid juices and yogurts supplied by a major retail chain are used to demonstrate the existence of price thresholds and their effects on price elasticity in every case it was found that within the thresholds or latitude of acceptance consumers are relatively less sensitive to price variations while beyond them a higher sensitivity was observed in some cases a product brand was classified as inelastic within the latitude of acceptance and elastic outside of it

optimal investment portfolio in renewable energy the spanish case abstract this article presents a model for investing in renewable energies in the framework of the spanish electricity market in a way that risk is minimised for the investor while returns are maximised the model outlined here is based on an economic model for calculating cash flows intended to obtain the internal rate of return irr of the different energies being studied wind photovoltaic mini hydro and thermo electrical the irrs obtained are considered the returns on investments while their standard deviations are considered associated risks in order to minimise risk a comprehensive portfolio of investments is created that includes all of the available energies by means of a system of linear equations the solution of the linear system is graphically checked using the efficient frontier method for the different financing options several case studies within the renewable energies plan per is its spanish abbreviation that is in force in spain in the period 2005 2010 are analysed in order to illustrate the method as are other case studies using different types of financing helping us to reach the pertinent conclusions

mergers with differentiated products the case of the ready to eat cereal industry traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products i discuss an alternative which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger i estimate a brand level demand system for ready to eat cereal using supermarket scanner data and use the estimates to 1 recover marginal costs 2 simulate postmerger price equilibria and 3 compute welfare effects under a variety of assumptions the methodology is applied to five mergers two of which occurred and for which i compare predicted to actual outcomes

power sector reform in small island developing states what role for renewable energy technologies abstract due to various pressures and desires more and more developing countries embark on power sector reform programmes yet there are a wide range of reform options and at present insufficient evidence is available as to which path will deliver best the desired objectives presently most small island developing states sids are dependent on high cost fossil fuel imports for power generation in spite of evidence that harnessing abundant domestic renewable sources of energy can deliver environmental social and economic benefits however depending on the type of power sector reform the transition towards renewable energy technologies rets can be either undermined or facilitated the specific focus on sids is justified because they have inherent characteristics that limit the degree to which the power sector can be transformed in comparison to larger continental developing countries with specific reference to sids this manuscript reviews the drivers and desires for power sector reform as well as presenting the available reform options and their implications on the up take of rets in addition to elaborating aspects of market governance other barriers to the consideration of rets such as financial bias in investment human capacity and environmental policy are discussed in view of this discussion which is based on evidence from recent reform programmes and theoretical academic literature recommendations are formulated that discourage full privatisation of the power sector as well as proposing less dogmatic lending conditions by international assistance bodies

empirical generalizations from reference price research considerable theoretical justification for consumers use of psychological reference points exists from the research literature from a managerial perspective one of the most important applications of this concept is reference price an internal standard against which observed prices are compared in this paper we propose three empirical generalizations that are well supported in the marketing literature first there is ample evidence that consumers use reference prices in making brand choices second the empirical results on reference pricing also support the generalization that consumers rely on past prices as part of the reference price formation process third consistent with other research on loss aversion consumers have been found to be more sensitive to losses i e observed prices higher than reference prices than gains we also propose topics for further research on reference prices

the future role of photovoltaics a learning curve versus portfolio perspective the current cost disadvantage of photovoltaics pv risks to reduce its relevance in climate policy strategies depending on the used assumptions electricity from pv can become competitive between 2015 and 2040 cost competitiveness is however a conditional criterion and as an alternative to the learning curve perspective the future role of pv in electricity production is assessed from a portfolio theory or capital asset pricing model perspective in this analysis the focus is on the input price risks fossil fuel price volatility can strongly reduce the financial return of conventional generating technologies from a welfare perspective energy planners should try to minimise this risk by adding risk neutral or no risk technologies to their portfolio with an analysis for the year 2025 we illustrate how the addition of renewable capacity to an existing portfolio can lower total portfolio risk without a significant reduction of profitability pv then emerges as an attractive technology especially once the best locations for wind energy are already developed

piero sraffa and the true object of economics the role of the unpublished manuscripts this special issue is concerned with the work of piero sraffa and with recent developments in its interpretation occasioned by the opening of the sraffa archives in late 1993 1 it brings together some of the contributions to a workshop on this theme that was sponsored by the cambridge journal of economics and held in july 2010 on the occasion of the 50th anniversary of the publication of piero sraffa s major work production of commodities by means of commodities pcmc the original workshop on new perspectives on the work of piero sraffa was aimed at sraffa scholars who had taken the opportunity to engage with materials in the sraffa archives and who were interested in exploring their potential for revisiting and placing pcmc in the wider context of ongoing debates on economic philosophy economic theory and economic policy as is usually the case not all presentations made at the workshop were advanced for consideration in this special issue nor could all invitees attend heinz kurz as chief editor of the sraffa archives agreed to present his view on the relevance of the sraffa archives to research on sraffa and to comment on contributions at the workshop as well as on their final versions submitted for publication in this special issue kurz s contribution to this special issue was thus written in the short time available between the receipt of final versions and publication deadlines we are indebted to him for his cooperation in the preparation of this special issue we are especially grateful for his patience in the time taken to bring this project to publication this abstract was borrowed from another version of this item

an empirical analysis of latitude of price acceptance in consumer package goods scanner panel data analyses for sweetened and unsweetened drink categories with four brands in each support the presence of a region of price insensitivity around a reference price the analyses also suggest that consumers with higher average reference price have a wider latitude of price acceptance consumers with a higher frequency of purchase i e shorter average interpurchase time interval are found to have a narrower latitude of price acceptance because they are more aware of the range of price distributions finally consumers with a higher average brand loyalty have a wider latitude of price acceptance demonstrating greater tolerance of price fluctuations

behavioral portfolio theory we develop a positive behavioral portfolio theory bpt and explore its implications for portfolio construction and security design the optimal portfolios of bpt investors resemble combinations of bonds and lottery tickets consistent with friedman and savage s 1948 observation we compare the bpt efficient frontier with the mean variance efficient frontier and show that in general the two frontiers do not coincide optimal bpt portfolios are also different from optimal capm portfolios in particular the capm twofund separation does not hold in bpt we present bpt in a single mental account version bpt sa and a multiple mental account version bpt ma bpt sa investors integrate their portfolios into a single mental account while bpt ma investors segregate their port folios into several mental accounts bpt ma portfolios resemble layered pyramids where layers are associated with aspirations we explore a two layer portfolio where the low aspiration layer is designed to avoid poverty while the high aspiration layer is designed for a shot at riches

fuel mix diversification incentives in liberalized electricity markets a mean variance portfolio theory approach monte carlo simulations of gas coal and nuclear plant investment returns are used as inputs of a mean variance portfolio optimization to identify optimal base load generation portfolios for large electricity generators in liberalized electricity markets we study the impact of fuel electricity and co2 price risks and their degree of correlation on optimal plant portfolios high degrees of correlation between gas and electricity prices as observed in most european markets reduce gas plant risks and make portfolios dominated by gas plant more attractive long term power purchase contracts and or a lower cost of capital can rebalance optimal portfolios towards more diversified portfolios with larger shares of nuclear and coal plants

prospect theory and mean variance analysis the experimental results of prospect theory pt reveal suggest that investors make decisions based on change of wealth rather than total wealth that preferences are s shaped with a risk seeking segment and that probabilities are subjectively distorted this article shows that while pt s findings are in sharp contradiction to the foundations of mean variance mv analysis counterintuitively when diversification between assets is allowed the mv and pt efficient sets almost coincide thus one can employ the mv optimization algorithm to construct ptefficient portfolios the markowitz 1952a tobin 1958 mean variance mv rule is probably the most popular investment decision rule under uncertainty in economics and in finance and it is widely employed by both academics and practitioners the strength of the mv analysis is that in the case of normal return distributions the choice of any expected utility maximizing risk averse individual will be according to the mv rule 1 the mv framework is the foundation of the sharpe 1964 lintner 1965 capital asset pricing model capm which is a cornerstone of modern finance moreover the mv framework provides a very important practical procedure for the construction of efficient portfolios while standard economic theory and in particular mv analysis assume expected utility maximization and risk aversion in a breakthrough article kahneman and tversky 1979 show that the actual behavior of individuals systematically and consistently violates these

consumer price and promotion expectations an experimental study the authors report results from a controlled experiment designed to investigate the impact of a brand s price promotion frequency and the depth of promotional price discounts on the price consumers

maximizing profit of a food retailing chain by targeting and promoting valuable customers using loyalty card and scanner data abstract in this paper we set up a house of profit model an approach of maximizing profit of a food retailing chain by targeting and promoting valuable customers our model combines segmentation analysis of households using loyalty card and scanner data price and promotion elasticity analysis simulation of effects of pricing and promotion price and promotion optimization to maximize profit these components are well known in the literature and each of them has received considerable independent study however in this study we combine each of these components into one consistent application orientated model we then demonstrate using panel data that the combination has a synergic effect on the efficiency of estimation and the maximization of profit e g price and promotion elasticity estimation is improved by conducting it within market segments rather than across an entire hetereogeneous population these estimates are further improved by incorporating pass through a functional relationship between a retailer s unit prices and unit costs

on alternative notions of change and choice krishna bharadwaj s legacy krishna bharadwaj following upon the work and insights of sraffa made substantial contributions to our understanding of what is implied in the neoclassical notion of change and its related notion of choice in this respect she appears closer to the spirit of sraffa s critique of neoclassical theory than many others she also supplemented important elements in building an alternative approach based on classical political economy which is free from the need to employ marginal magnitudes and does not require hypothetical or potential changes to determine the resting positions of economic variables moreover the notion of choice is rescued from the parable of preferences and given more meaningful contents allowing for consideration of habits customs and power relationships 1 premise the consumption and production of goods is the kind of human activity to which the term economic is applied in most societies these activities are mediated through exchange and in capitalist societies exchange is performed in organised markets in the history of economic thought a range of different conceptions have been put forward to explain how individuals interact in markets and various accounts have been advanced of ways to understand which are the incentives and the constraints affecting their behaviour and decision making in neoclassical theories choices in consumption and production are conceptualised through reasoning at the margin under the ceteris paribus assumption i e that everything else remains unchanged this method provides the means to measure the effects of a small technically infinitesimal variation in quantities of selected variables such as utility and cost which are compared with the relevant prices to determine the optimum choice by individuals the optimal choice framework is in fact the basis upon which price and quantities are simultaneously determined in the neoclassical world

commercial use of upc scanner data industry and academic perspectives the authors report the findings from an exploratory investigation of the use of upc scanner data in the consumer packaged goods industry in the u s the study examines the practitioner community s view of the use of scanner data and compares these views with academic research forty one executives from ten data suppliers packaged goods manufacturers and consulting firms participated in wide ranging in person interviews conducted by the authors the interviews sought to uncover key questions practitioners would like to answer with scanner data how scanner data is applied to these questions and the industry s perspective regarding the success that the use of scanner data has had in each area the authors then compare and contrast practitioners views regarding the resolution of each issue with academic research this produces a 2 2 classification of each question as resolved or unresolved from the perspectives of industry and academia along the diagonal of the 2 2 issues viewed as unresolved by both groups are important topics for future research issues deemed resolved by both groups are correspondingly of lower priority in the off diagonal cells industry and academics disagree these topics should be given priority for discussion information exchange and possible further research practitioners reported that scanner data analysis has had the most success and been most widely adopted for decision making in consumer promotions i e coupons trade promotions and pricing for example logit and regression models applied to scanner data have revealed very low average consumer response to coupons which has directly led to reduced couponing activity managers also reported high levels of comfort with and impact from analyses of trade promotions and price elasticities while industry views most of the issues in these areas to be resolved academic research raises concerns about a number of practices in common commercial use these include price threshold analysis and trade promotion evaluation using baseline and incremental sales in product strategy advertising and distribution management practitioners reported that the use of scanner data has had more limited development success and impact in the case of new product decisions scanner data use has been slow to develop due to the inherent limitations of historicaldata for these decisions and a heavy reliance on traditional primary research methods in advertising scanner data is widely analyzed with models but confusion among practitioners is very high due to controversies about methods e g what level of data aggregation is best and conflicting results in distribution and retail management scanner data use has tremendous potential but a mixed track record to date thus practitioners view the use of scanner data as unresolved for most issues in product strategy advertising and distribution this view is largely though not entirely consistent with academic research which has only begun to address many of the key questions raised by practitioners in light of the large number of unresolved issues and mixed record of scanner data use to date the authors offer aseries of specific recommendations for immediate and long term research priorities that are likely to have the greatest impact on commercial utilization of upc scanner data topics of immediate priority include price thresholds and gaps baseline and incremental sales base price elasticity competitive reactions measurement of advertising effects management of brand equity rationalization of product assortments and category management long term priorities include a greater emphasis on profitability versus sales or market share developing prescriptive models versus descriptive models and the need for industry standards

measuring cross category price effects with aggregate store data our objective is to understand the cross category effects of marketing activities using aggregate store level scanner data for this we provide a framework derived from household utility maximizing behavior which assumes that a household chooses the bundle of products with the highest utility we use a second order taylor series approximation to an arbitrary utility function to represent bundle utility aggregate sales or shares in each category are derived under the assumption that households are heterogeneous in their preferences and in their sensitivities to marketing activities our estimation accounts for potential price endogeneity in demand using store level scanner data on four product categories liquid laundry detergents powdered laundry detergents liquid fabric softeners and sheet fabric softeners we find evidence for a complementary relationship between liquid softeners and both forms of detergents we also find that the magnitude of cross category elasticities are brand specific i e different brands in a category have a different price impact on the demand for a brand in another category the results have implications for retailers in terms of the potential need for cross category management as well as for manufacturers such as procter gamble that participate in all four categories we compare our model with a log log regression specification on three criteria estimated elasticities hold out sample predictions and retailer cross category pricing we find that the proposed model produces more reasonable estimates relative to the log log model it predicts better and is more useful for pricing purposes further in a simulation study we show that our proposed model can recover the elasticities from a data generating process that simulates household level joint outcomes across categories even after these data have been aggregated to brand level shares within each category by contrast the log log regression model is unable to do so

the public promotion of wind energy in spain from the transaction costs perspective 1986 2007 this paper analyzes the success of wind energy in spain from 1986 to 2007 certain special characteristics have emerged in spain that provide credibility to the feed in tariff fit device to promote this energy source to explain this success the analysis will focus on the intrinsic characteristics of fit using the concepts of the transaction cost theory tce nevertheless in this framework special attention is placed on the role that specific political and institutional factors have played in providing stability to this instrument thanks to an early start and an on going and generous fit device wind energy promotion for electricity has become a political success story in spain the main implication of this analysis is that this success is mainly due to the trade off between stability and flexibility in the use of spanish fit

circuitous processes jigsaw puzzles and indisputable results making best use of the manuscripts of sraffa s production of commodities by means of commodities the opening of the sraffa archive has allowed the production of credible narratives of the development of sraffa s thought based on documentary evidence the archive is complex especially in the case of the papers relating to production of commodities by means of commodities pcmc but the author s paperwork helps guide us through the development of his ideas affirming the causal relationship between thought and archive the complex interrelationships between materials in the archive make a painstaking scholarly approach necessary but rewarding allowing authors to use material of high evidential value to corroborate the cases they are making the archive has primarily been used by historians of economic thought however as the material contextualises pcmc it may also be useful to those working on economic theory from a sraffian perspective copyright oxford university press

a monte carlo based decision support tool for assessing generation portfolios in future carbon constrained electricity industries abstract this paper presents a novel decision support tool for assessing future generation portfolios in an increasingly uncertain electricity industry the tool combines optimal generation mix concepts with monte carlo simulation and portfolio analysis techniques to determine expected overall industry costs associated cost uncertainty and expected co 2 emissions for different generation portfolio mixes the tool can incorporate complex and correlated probability distributions for estimated future fossil fuel costs carbon prices plant investment costs and demand including price elasticity impacts the intent of this tool is to facilitate risk weighted generation investment and associated policy decision making given uncertainties facing the electricity industry applications of this tool are demonstrated through a case study of an electricity industry with coal ccgt and ocgt facing future uncertainties results highlight some significant generation investment challenges including the impacts of uncertain and correlated carbon and fossil fuel prices the role of future demand changes in response to electricity prices and the impact of construction cost uncertainties on capital intensive generation the tool can incorporate virtually any type of input probability distribution and support sophisticated risk assessments of different portfolios including downside economic risks it can also assess portfolios against multi criterion objectives such as greenhouse emissions as well as overall industry costs

electricity generation cost in isolated system the complementarities of natural gas and renewables in the canary islands abstract the canary islands offer an example of an isolated electric grid of relative important size within the eu due to its peculiarities the role of renewable energies and their complementarity with fossil fuels offers a solid path to achieving the main energy policy goals of the islands the purpose of this paper is to assess the current situation and the energy objectives proposed in the energy plan of the canaries pecan 2006 for the electricity industry taking into account the average cost and the risk associated with the different alternatives for generating electricity by means of the mean variance portfolio theory our analysis highlights the inefficiency of the current electricity generating mix in terms of cost risk and lack of diversification shifting toward an efficient system would involve optimizing the use of endogenous energy sources and introducing natural gas to generate electricity this scenario would mean reducing both cost and risk by almost 30 each as well as atmospheric co 2 emissions our results agree with the pecan philosophy

energy planning and modern portfolio theory a review abstract modern portfolio theory mpt stands as a widely accepted methodology to meet the challenges associated with the definition of energy planning for a particular territory or region energy planning is thus framed as an investment selection problem mpt is characterized by having a wider capacity and conceptual richness than the other previously used methodologies such as the individual least cost alternative the portfolio approach is based on solving for an objective function that seeks to minimize either the cost or the risk of the portfolio subject to different constraints considering that real electricity generation assets can be defined in terms of cost or return and economic risk for each alternative technology the relevant portfolios are the result of solving the optimization model to determine the efficient cost risk frontier the work presented here consists of an exhaustive review of the literature in relation to the application of mpt methodology to the field of energy planning and electricity production a new classification is proposed from a financial perspective of the selection of investments from the preceding studies it delves deeper into the explanation of the limits to the methodology and into the concept of risk which is key from both a financial and an energy perspective the main methodological contributions found in the literature are examined that are aimed at improving the capacity of the model and adjusting it to the reality of the electricity market finally conclusions are provided from the works analyzed in terms of renewable technologies and the policy implications derived from them in most studies a preference has been shown for the inclusion of renewable technologies in the efficient portfolios however in order to implement the decision to increase the share of renewable technologies greater flexibility in the interconnection capacity between states and in storage capacity is needed

asymmetric reference price effects and dynamic pricing policies we consider a group of frequently purchased consumer brands which are partial substitutes and examine two situations the first where the group of brands is managed by a retailer and second where the brands compete in an oligopoly we assume that demand is a function of actual prices and reference prices and develop optimal dynamic pricing policies for each situation in addition to researchers studying pricing strategy our results may interest retailers choosing between hi lo pricing and an everyday low price and manufacturers assessing whether to follow procter gamble s lead and replace a policy of funding consumer price reductions through trade deals with a constant wholesale price a reference price is an anchoring level formed by customers based on the pricing environment the literature suggests that demand for a brand depends not only on the brand price but also whether the brand price is greater than the reference price a perceived loss or is less than it a perceived gain the responses to gains and losses are asymmetric broadly speaking we find that when enough consumers weigh gains more than losses the optimal pricing policy is cyclical likewise when they weigh losses more than gains a constant price is optimal thus we provide a rationale for dynamic pricing which is quite distinct from the three explanations previously offered 1 decreasing unit variable costs due to learning effects 2 the transfer of inventory to consumers who face lower inventory holding costs than do retailers and 3 competitive effects our explanations apply even when the other explanations do not i e in mature product categories where learning effects are minimal when retailer inventories are minimized through the use of just in time policies and when competitive effects do not exist as in a monopoly greenleaf 1995 has shown numerically that in the presence of reference price effects the optimal pricing policy for a monopolist can be cyclical we first analytically extend greenleaf s result to a monopolist with a constant cost of goods facing a homogeneous market where all customers either weigh gains more than losses or vice versa using this building block we examine a monopolist retailer managing multiple brands we assume that demand is a linear function of prices of multiple brands and together with an expression which reflects the reference price effect further we assume that the retailer maximizes average profit per period next we analyze a duopoly and extend the results to an oligopoly we assume that the manufacturers are able to set the retail prices as in an integrated channel here we retain the same demand function as for the retailer and derive markov perfect nash equilibria we use two alternative processes of reference price formation the exponential smoothed es past price process which is frequently used in the literature and for the multi brand situations the recently proposed reference brand rb process hardie johnson and fader 1993 in the latter the reference price is the current price of the last brand bought the reference brand we adapt the individual level rb formulation in hardie et al to an aggregate demand specification for the es process we obtain most results analytically for the rb process we use simulation finally we extend our results to a population with two customer segments segment 1 which weighs gains more than losses and segment 2 which does the opposite i e is loss averse when the market consists exclusively of segment 1 customers and es is the reference price process we find that prices are cyclical in all cases analyzed i e for a monopoly a monopolist retailer managing multiple brands a duopoly and an oligopoly if the rb formulation is the underlying process a monopolist retailer managing two brands uses cyclical prices but in a duopoly the equilibrium solution is for the brands to maintain constant prices when all customers belong to segment 2 i e they are loss averse constant prices are optimal in all cases for both reference price formulations when the population consists of both segment 1 and segment 2 and the es process applies we develop a sufficient condition for cyclical pricing policies to be optimal the condition is expressed in terms of the proportion of the two segment sizes the absolute difference between the gain and loss parameters of each segment and their respective exponential smoothing constants interestingly for reasonable values of the latter two factors cyclical policies are optimal even when the proportion of segment 1 is quite small similar magnitudes are obtained numerically for the rb case