“Psychophysics of Prices”: A Reappraisal

This communication will show that substantiation of the fair price theory invalidates Weber's Law and that the subjective price scale of the buyer seems to follow a logarithmic scale.

Abstract

In a recent JMR article [7] Kamen and Toman concluded that their data overwhelmingly supported a theory and contradicted Weber's Law as applied to price. The implication is that substantiation of the fair price theory invalidates Weber's Law. Other evidence [1, 3, 4, 5, 10, 11, 12] tends to support two conclusions concerning the subjective perception of price: (1) the subjective price scale of the buyer seems to follow a logarithmic scale, and (2) there is a range of acceptable prices for certain products. As Kamen and Toman recognize, the second conclusion is similar to the fair price notion. The first conclusion can be derived from Weber's Law, and both conclusions are compatible. This communication will show: