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We study the prevalence of multiattribute loss aversion and reference effects in a revenue management setting based on data of individual-level purchases over a series of concert performances. The reference dependence that drives consumer choice is not only based on the price but also on observed sales (as a fraction of the seating capacity) during their past visits. We find that consumers suffer from loss aversion on both prices and seats sold: consumers incur significant utility loss when prices are above their references or when the actual seat sales are lower than their references. We suggest pricing policies that can address consumer decisions driven by such reference dependence and loss aversion.
Originally published in Management Science © 2017 INFORMS
This is a pre-publication version. The final version is available at http://dx.doi.org/10.1287/mnsc.2016.2605
multiattribute reference dependence, loss aversion, capacity-reference levels, empirical operations management, marketing
Tereyağoğlu, N., Fader, P. S., & Veeraraghavan, S. K. (2017). Multi-Attribute Loss Aversion and Reference Dependence: Evidence from the Performing Arts Industry. Management Science, 64 (1), 421-436. http://dx.doi.org/10.1287/mnsc.2016.2605
Advertising and Promotion Management Commons, Applied Behavior Analysis Commons, Behavioral Economics Commons, Business Administration, Management, and Operations Commons, Business Intelligence Commons, Cognition and Perception Commons, Cognitive Psychology Commons, Marketing Commons
Date Posted: 15 June 2018
This document has been peer reviewed.