Shift of reference point and implications on behavioral reaction to gains and losses

  • Masiero, Lorenzo Istituto di ricerche economiche (IRE), Facoltà di scienze economiche, Università della Svizzera italiana, Svizzera
  • Hensher, David A. Institute of Transport and Logistics Studies, Faculty of Economics and Business, The University of Sydney

20 p

English It is widely recognized that individual decision making is subject to the evaluation of gains and losses around a reference point. The estimation of discrete choice models increasingly use data from stated choice experiments which are pivoted around a reference alternative. However, to date, the specification of a reference alternative in transport studies is fixed, whereas it is common to observe individuals adjusting their preferences according to a change in their reference point. This paper focuses on individual reactions, in a freight choice context, to a negative change in the reference alternative values, identifying the behavioural implications in terms of loss aversion and diminishing sensitivity. The results show a significant adjustment in the valuation of gains and losses around a shifted reference alternative. In particular, we find an average increase in loss aversion for cost and time attributes, and a substantial decrease for punctuality. These findings are translated to significant differences in the willingness to pay and willingness to accept measures, providing supporting evidence of respondents’ behavioural reaction.
  • English
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  • RERO DOC 17417
  • ARK ark:/12658/srd1318204
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