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Abstract

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 purchase or selling price from the supplier's point of view. An analytical causal study conveys an idea of the significance of this aspect of pricing policy for consumer satisfaction with the purchase act. Specifically, the study examines how the attractiveness of the offer impacts on and combines with satisfaction with deal, customer service, and condition of the vehicle to determine satisfaction with the vehicle purchase. © 2002 Wiley Periodicals, Inc.