The impact of loss aversion on retailers’ business operations in the commodity market

Gaston Day School Shanghai Shangde, Shanghai, China

^* Corresponding author: 468996884@qq.com

Abstract

As the core concept of behavioural economics, loss aversion has a multi-dimensional impact on the business activities of sellers in the commodity market. Research shows that in the upstream part of the industrial chain, loss aversion will alter the decision-making logic of producers and sellers. Manufacturers may adopt conservative production strategies to avoid the risk of overcapacity, while sellers tend to reduce inventory orders to avoid unsalable losses. Both parties can adopt appropriate contract types according to risk preference in contract signing to reduce the loss of psychological utility caused by potential losses. In the downstream market, loss aversion has a profound impact on the interaction mode between sellers and consumers. Sellers actively disclose quality information through a user evaluation mechanism, and use positive evaluation to alleviate consumers’ concern about “payment loss”; At the same time, the marketing strategy enhances or weakens consumers’ loss aversion perception, so as to stimulate purchasing behaviour. This study systematically examines the path of loss aversion in production and marketing coordination and consumption decision-making, and provides a theoretical reference for retailers to optimise business strategies and improve market efficiency.