Multiattribute Loss Aversion and Reference Dependence: Evidence from the Performing Arts Industry

Necati Tereyağoğlu (), Peter S. Fader () and Senthil Veeraraghavan ()
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Necati Tereyağoğlu: Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia 30308
Peter S. Fader: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Senthil Veeraraghavan: The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104

Management Science, 2018, vol. 64, issue 1, 421-436

Abstract: We study the prevalence of multiattribute loss aversion and reference effects in a revenue management setting based on data of individual-level purchases over a series of concert performances. The reference dependence that drives consumer choice is not only based on the price but also on observed sales (as a fraction of the seating capacity) during their past visits. We find that consumers suffer from loss aversion on both prices and seats sold: consumers incur significant utility loss when prices are above their references or when the actual seat sales are lower than their references. We suggest pricing policies that can address consumer decisions driven by such reference dependence and loss aversion.

Keywords: multiattribute reference dependence; loss aversion; capacity-reference levels; empirical operations management; marketing (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:64:y:2018:i:1:p:421-436

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