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Abstract he pricing and ordering decisions under random demands are studied for risk-averse retailers with the reference profit and consumers with reference price, and the retailer’s expected utility is established by prospect theory. The solution approach and sensitivity analysis of the optimal decisions are obtained under the symmetric and asymmetric reference prices. Results indicate that the retailer’s effect increases in the reference price, but decreases in loss aversion level and reference level.Specifically, the decision and utility of the retailer with reference effect decreased compared to the results of loss neutral or the lowest reference level. The retailer can ignore the reference price under certainty condition. The retailer chooses the optimal strategy according to the comparison between the optimal pricing and the reference price, since the decisions can be influenced by the reference price effect and the perception for loss or gain of consumers.
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Received: 25 November 2019
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