Loss aversion and a kinked demand curve: evidence from contingent behaviour analysis of seafood consumers

Ash Morgan ()

Applied Economics Letters, 2008, vol. 15, issue 8, 625-628

Abstract: Several laboratory experiments and market-based research in the fields of psychology, economics and marketing have provided increasing evidence of individuals exhibiting loss aversion tendencies, with decision-making based on a pre-existing reference point. This creates an S-shaped value function and associated kink in the demand curve. This research provides contingent behaviour analysis of 1790 seafood consumers across the Mid-Atlantic region. A survey is specifically designed to elicit respondents' change in consumption from their reference point when faced with price variations in the seafood market. Results from a Tobit model with random effects provide empirical support of consumers behaving in a manner consistent with loss aversion theory, revealing a kinked demand curve for seafood meals at the respondents' reference point.

Date: 2008
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DOI: 10.1080/13504850600721940

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