Where Do You Want to Go Skiing? The Effect of the Reference
Point and Loss Aversion

J 2019

Where Do You Want to Go Skiing? The Effect of the Reference Point and Loss Aversion

GOCMANOVÁ, Zuzana, Jaromír SKORKOVSKÝ, Štěpán VESELÝ and Jan BÖHM

Basic information

Original name

Where Do You Want to Go Skiing? The Effect of the Reference Point and Loss Aversion

Authors

GOCMANOVÁ, Zuzana (703 Slovakia), Jaromír SKORKOVSKÝ (203 Czech Republic, belonging to the institution), Štěpán VESELÝ (203 Czech Republic, belonging to the institution) and Jan BÖHM (203 Czech Republic, belonging to the institution)

Edition

Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2019, 1211-8516

Other information

Language

English

Type of outcome

Článek v odborném periodiku

Field of Study

50204 Business and management

Country of publisher

Czech Republic

Confidentiality degree

není předmětem státního či obchodního tajemství

References:

URL

RIV identification code

RIV/00216224:14560/19:00109143

Organization unit

Faculty of Economics and Administration

DOI

http://dx.doi.org/10.11118/actaun201967010243

Keywords in English

prospect theory; reference point; loss aversion; preference shifts; marketing

Abstract

V originále

This paper has explored the effect of loss aversion and changes of reference points in a hypothetical choice experiment in microeconomic consumption behavior. We confirm that people tend to prefer alternatives that do not compare unfavorably to other options in the choice set (i.e. people are loss averse). We also confirm that the evaluation of alternatives is reference dependent: by adding different alternatives to a choice set the relative (mutual) attractiveness of the remaining alternatives can be reversed (e.g., A is chosen over B in a choice set including C1, but B is chosen over A in a choice set including C2). The choice tasks we employed were based on real offers from an actual travel agency. This enhances the external validity of our findings that in general the role of the reference point and loss aversion has a significant impact on the consumer’s behavior. Thus, our results suggest the possibility of a relatively simple and practical application of prospect theoretical principles in marketing campaigns. We expect that our findings might be added to a growing body of literature on using the prospect theory for understanding and predicting consumer’s behavior. However, with small sample size, caution must be applied, as the findings might not be transferable to all conditions. Another significant limitation that needs to be considered is the survey method used. The results are not captured from the real marketplace; the only likely choice was made. When making an actual decision, the respondents might act differently than stated in the questionnaire.

Links

MUNI/A/1503/2018, interní kód MU

Name: Matematické statistické modelování 3 (Acronym: MaStaMo3)

Investor: Masaryk University, Category A

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Citovat

GOCMANOVÁ, Zuzana, Jaromír SKORKOVSKÝ, Štěpán VESELÝ and Jan BÖHM. Where Do You Want to Go Skiing? The Effect of the Reference Point and Loss Aversion. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis. 2019, vol. 67, No 1, p. 243-252. ISSN 1211-8516. Available from: https://dx.doi.org/10.11118/actaun201967010243.

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   keywords = {prospect theory; reference point; loss aversion; preference shifts; marketing},
   language = {eng},
   issn = {1211-8516},
   journal = {Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis},
   title = {Where Do You Want to Go Skiing? The Effect of the Reference Point and Loss Aversion},
   url = {https://acta.mendelu.cz/media/pdf/actaun_2019067010243.pdf},
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   year = {2019}
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L2  - https://acta.mendelu.cz/media/pdf/actaun_2019067010243.pdf
N2  - This paper has explored the effect of loss aversion and changes of reference points in a hypothetical choice experiment in microeconomic consumption behavior. We confirm that people tend to prefer alternatives that do not compare unfavorably to other options in the choice set (i.e. people are loss averse). We also confirm that the evaluation of alternatives is reference dependent: by adding different alternatives to a choice set the relative (mutual) attractiveness of the remaining alternatives can be reversed (e.g., A is chosen over B in a choice set including C1, but B is chosen over A in a choice set including C2). The choice tasks we employed were based on real offers from an actual travel agency. This enhances the external validity of our findings that in general the role of the reference point and loss aversion has a significant impact on the consumer’s behavior. Thus, our results suggest the possibility of a relatively simple and practical application of prospect theoretical principles in marketing campaigns. We expect that our findings might be added to a growing body of literature on using the prospect theory for understanding and predicting consumer’s behavior. However, with small sample size, caution must be applied, as the findings might not be transferable to all conditions. Another significant limitation that needs to be considered is the survey method used. The results are not captured from the real marketplace; the only likely choice was made. When making an actual decision, the respondents might act differently than stated in the questionnaire.
ER  -

GOCMANOVÁ, Zuzana, Jaromír SKORKOVSKÝ, Štěpán VESELÝ and Jan BÖHM. Where Do You Want to Go Skiing? The Effect of the Reference Point and Loss Aversion. \textit{Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis}. 2019, vol.~67, No~1, p.~243-252. ISSN~1211-8516. Available from: https://dx.doi.org/10.11118/actaun201967010243.

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