Loss Aversion and Consumption Choice: Theory and Experimental Evidence

Georg Kirchsteiger, Martin Peitz and Heiko Karle

No 9183, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this paper we analyze a consumer choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. We make use of the fact that participants diff er in their reported taste difference between the two sandwiches and the degree of loss aversion which we measure separately. We find that more loss-averse participants are more likely to opt for the cheaper sandwich provided that their reported taste difference is below some threshold, confirming the model?s predictions.

Keywords: Contextual reference points; Loss aversion; Reference-dependent utility (search for similar items in EconPapers)
JEL-codes: C91 D01 D11 D83 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-cbe, nep-evo, nep-exp and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Loss Aversion and Consumption Choice: Theory and Experimental Evidence (2015)
Working Paper: Loss Aversion and Consumption Choice: Theory and Experimental Evidence (2013)
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