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

Masiero, Lorenzo ; Hensher, David

In: Transportation, 2011, vol. 38, no. 2, p. 249-271

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    Title
    • Shift of reference point and implications on behavioral reaction to gains and losses
    Author
    • Masiero, Lorenzo. Institute of Transport and Logistics Studies (ITLS), Faculty of Economics and Business, The University of Sydney, 2006, Sydney, NSW, Australia
    • Hensher, David. Institute of Transport and Logistics Studies (ITLS), Faculty of Economics and Business, The University of Sydney, 2006, Sydney, NSW, Australia
    Document Type
    • Postprint
    Language
    • English
    Published in
    • Transportation, 2011, vol. 38, no. 2, p. 249-271. Springer US; http://www.springer-ny.com
    Other Version
    OAI-PMH Identifier
    • oai:doc.rero.ch:316176
    Summary
    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 has been 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