Loss aversion in post-sale purchases of two close substitutes

Jialiang Zhu and Zeyu Wang

Economics Letters, 2022, vol. 218, issue C

Abstract: This paper employs micro-level data to identify consumers’ loss aversion when choosing between two products that share the same price and observable product characteristics. The analysis focuses on post-sale observations where one product experienced a sale (a discounted price), but the price of the other product did not change. The paper contributes to the literature by demonstrating that a product benefits when its close competitor’s sale is over. A loss-averse consumer would switch to the close substitute even when both products share the same price.

Keywords: Loss aversion; Post-sale purchases; Close substitutes (search for similar items in EconPapers)
JEL-codes: D12 D91 M31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:218:y:2022:i:c:s0165176522002671

DOI: 10.1016/j.econlet.2022.110752

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