Price Expectations and Reference-Dependent Preferences

Robert Rutledge, Vinayak Alladi and Stephen Cheung
Additional contact information
Robert Rutledge: University of Sydney
Vinayak Alladi: University of Sydney

No 15375, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We experimentally test Kőszegi and Rabin's (2006, 2007) theory of reference-dependent preferences in the context of price expectations. In an incentivised valuation task, participants are endowed with a mug and provide their willingness to accept (WTA) to sell it. We manipulate the sale price in a separate, exogenous forced sale scenario, which is predicted to produce a 'comparison effect', moving WTA in the opposite direction to the forced sale price. Consistent with the theory, we observe a treatment effect of between AUD $0.79 and $2.06 in the hypothesised direction; however, it is statistically insignificant. We also elicit participants' loss aversion to account for heterogeneity in the theorised effect; however, controlling for the interaction between our treatment and loss aversion does not consistently strengthen our result.

Keywords: comparison effect; price expectations; reference dependence; loss aversion (search for similar items in EconPapers)
JEL-codes: C91 D90 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2022-06
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published - revised version published in: Journal of Economic Behavior and Organization, 2025, 231, 106927

Downloads: (external link)
https://docs.iza.org/dp15375.pdf (application/pdf)

Related works:
Journal Article: Price expectations and reference-dependent preferences (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp15375

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().