Reference-Dependent Preferences and Loss Aversion: A Discrete Choice Experiment in the Health-Care Sector

Einat Neuman () and Shoshana Neuman ()
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Einat Neuman: University Center of Ariel

No 3238, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: A Discrete Choice Experiment (DCE) in the health-care sector is used to test the loss aversion theory that is derived from reference-dependent preferences: The absolute subjective value of a deviation from a reference point is generally greater when the deviation represents a loss than when the same-sized change is perceived as a gain. As far as is known, this paper is the first to use a DCE to test the loss aversion theory. A DCE appears to be a highly suitable tool for this testing because it estimates the marginal valuations of attributes, based on deviations from a reference point (a constant scenario). Moreover, loss aversion can be examined for each attribute separately. A DCE can also be applied to nontraded goods with non-tangible attributes. A health-care event is used for empirical illustration: The loss aversion theory is tested within the context of preference structures for maternity-ward attributes, estimated using data entailing 3850 observations from a sample of 542 women who recently gave birth. Seven hypotheses are presented and tested. Overall, significant support for behavioral loss aversion theories was found.

Keywords: preferences; attributes; loss aversion; reference-dependence; Discrete Choice Experiment; maternity-wards (search for similar items in EconPapers)
JEL-codes: D01 D12 I19 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-dcm and nep-upt
Date: 2007-12
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