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

  • Lorenzo Masiero

    ()

  • David Hensher

    ()

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.

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File URL: http://hdl.handle.net/10.1007/s11116-010-9302-0
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Article provided by Springer in its journal Transportation.

Volume (Year): 38 (2011)
Issue (Month): 2 (March)
Pages: 249-271

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Handle: RePEc:kap:transp:v:38:y:2011:i:2:p:249-271
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=103007

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