Part one of term paper
There is a psychological theory that states that people for perceptions based on present and past stimuli (Helson, 1964). This has been extended by marketing academics to include the concept of reference pricing. They do this by stating that consumers, based on their previous exposure to products and their promotion - have an internal 'lear ...

Part two of term paper
... the price decision - there is little evidence to support the theory in actually setting price structures. Put simply, a reference price is a standard against which observed prices are compared (Biswas & Blair, 1991). There are two types of reference price: internal and external. External reference prices are ones that exist in the environment and are used by consumers to assess the value of an item. Examples of these reference prices include reduced promotional prices and a competitor's price ( ...