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Willingness to Pay with Reference-dependent Preferences: A Comparative Analysis of Attribute-based and Alternative-based Approach

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  • Cui, Manlin
  • Yue, Chengyan
  • Treiber, Erin L.
  • Clark, Matthew

Abstract

Consumer preferences are often influenced by reference-dependent preferences. This study investigates the influence of reference-dependent preferences on the estimation of willingness to pay (WTP) for table grape attributes elicited by a second-price auction. We evaluate two models: the attribute-based reference dependence model, where individuals compare the target product’s attributes with their favorite ones, and the alternative-based reference dependence model, where comparisons are made with a reference product. Results show that including reference points impacts the WTP estimation for different attributes, with varying levels of loss aversion, suggesting the attribute-specific influence of reference points.

Suggested Citation

  • Cui, Manlin & Yue, Chengyan & Treiber, Erin L. & Clark, Matthew, 2025. "Willingness to Pay with Reference-dependent Preferences: A Comparative Analysis of Attribute-based and Alternative-based Approach," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 57(2), pages 199-217, May.
    • Handle: RePEc:cup:jagaec:v:57:y:2025:i:2:p:199-217_1
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