This paper examines the conditions that make reference price manipulation beneficial to retailers. The paper offers a modelling approch that is based on two distinct dimensions; product category, and degree of market competition. The model shows that reference price manipulation ina competitive market is less beneficial to retailers than it is in a monopolistic market. Reference price manipulation of specific product is most advantageous to retailers when it is a frequently purchased, high-priced product in a competitive market, references price manipulation is less beneficial. The analysis gives rise to policy implications that could potentially improve consumer welfare.