Reference Dependence and Choice Overload

Joyee Deb and Jidong Zhou ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper offers an explanation for choice overload based on reference-dependent preferences. Consumers construct an ideal object that combines the best attributes of all objects in their choice set, and use this as a reference point. When the choice set expands, it is more likely to find a better object, but meanwhile the reference point improves, which makes all existing objects appear worse. We characterize when the latter reference-dependence effect dominates such that choice overload arises. We also show that purchase probability can decrease with object complexity, measured by the number of attributes.

Keywords: choice overload; reference dependence; loss aversion (search for similar items in EconPapers)
JEL-codes: D11 D9 M30 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:86261

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