Customers do not evaluate prices in a vacuum. Every price gets compared against something: what the customer paid last time, what they saw at a competitor, what the product "should" cost based on category norms, or whatever number is sitting next to the price on the page. That comparison number is the reference price, and it does most of the work in deciding whether a price feels acceptable.
Most pricing decisions assume customers see the price as an absolute number. They do not. The same $89 jacket reads as expensive next to $60 alternatives and as a steal next to a $200 RRP anchor. The price has not changed; the reference point has.
This means how you present a price matters as much as the price itself. Strong RRP framing, comparative tier displays, and explicit savings language all manipulate the reference point. Done honestly, this helps customers see real value. Done dishonestly, it crosses into deceptive pricing, which is increasingly regulated.
The biggest reference price you do not control is your competitor's. Customers researching a purchase will see their price too, and if it is meaningfully lower, it becomes the new anchor. Competitor monitoring is partly about pricing decisions and partly about understanding what reference price your customers are walking in with.
Example: A bedding brand displays its $129 sheets next to a $189 "original price" and category competitors at $159. Conversion is strong. A new entrant launches a similar product at $99, which spreads through Reddit and review sites. The brand's $129 reference price gets reset downward across its entire customer base, not because anything about the brand changed but because the anchor in customers' minds shifted.