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

Author

Listed:
  • Lorenzo Masiero

    (Istituto Ricerche Economiche (IRE), Università della Svizzera Italiana, Svizzera)

  • David A. Hensher

    (Institute of Transport and Logistics Studies (ITLS), The University of Sydney, Australia)

Abstract
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.

Suggested Citation

  • Lorenzo Masiero & David A. Hensher, 2010. "Shift of reference point and implications on behavioral reaction to gains and losses," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1005, USI Università della Svizzera italiana.
  • Handle: RePEc:lug:wpaper:1005
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    References listed on IDEAS

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    Cited by:

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    3. Stephane Hess & Amanda Stathopoulos & Andrew Daly, 2012. "Allowing for heterogeneous decision rules in discrete choice models: an approach and four case studies," Transportation, Springer, vol. 39(3), pages 565-591, May.
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    7. Melinda Matyas & Maria Kamargianni, 2019. "Survey design for exploring demand for Mobility as a Service plans," Transportation, Springer, vol. 46(5), pages 1525-1558, October.
    8. Amanda Stathopoulos & Stephane Hess, 2011. "Referencing, Gains-Losses Asymmetry And Non-Linear Sensitivities In Commuter Decisions: One Size Does Not Fit All!," Working Papers 0511, CREI Università degli Studi Roma Tre, revised 2011.
    9. McNair, Ben J. & Bennett, Jeff & Hensher, David A., 2011. "A comparison of responses to single and repeated discrete choice questions," Resource and Energy Economics, Elsevier, vol. 33(3), pages 554-571, September.
    10. Stephane Hess & Andrew Daly (ed.), 2014. "Handbook of Choice Modelling," Books, Edward Elgar Publishing, number 14820.
    11. Xueyan Li & Jing Li, 2021. "A freight transport price optimization model with multi bounded-rational customers," Transportation, Springer, vol. 48(1), pages 477-504, February.
    12. Abe, Makoto & Kaneko, Mitsuru, 2022. "Preference reversal: Analysis using construal level theory that incorporates discounting," Journal of choice modelling, Elsevier, vol. 45(C).
    13. Kim, Kyungah & Lee, Jongsu & Kim, Junghun, 2021. "Can liquefied petroleum gas vehicles join the fleet of alternative fuel vehicles? Implications of transportation policy based on market forecast and environmental impact," Energy Policy, Elsevier, vol. 154(C).
    14. Tao, Xuezong & Zhu, Lichao, 2020. "Meta-analysis of value of time in freight transportation: A comprehensive review based on discrete choice models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 138(C), pages 213-233.
    15. Feo-Valero, María & Arencibia, Ana Isabel & Román, Concepción, 2016. "Analyzing discrepancies between willingness to pay and willingness to accept for freight transport attributes," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 89(C), pages 151-164.
    16. S. Van Cranenburgh & S. Wang & A. Vij & F. Pereira & J. Walker, 2021. "Choice modelling in the age of machine learning -- discussion paper," Papers 2101.11948, arXiv.org, revised Nov 2021.
    17. Mesa-Arango, Rodrigo & Ukkusuri, Satish V., 2014. "Attributes driving the selection of trucking services and the quantification of the shipper’s willingness to pay," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 71(C), pages 142-158.
    18. Ding, Hongxing & Yang, Hai & Xu, Hongli & Li, Ting, 2023. "Status quo-dependent user equilibrium model with adaptive value of time," Transportation Research Part B: Methodological, Elsevier, vol. 170(C), pages 77-90.
    19. Juan de Dios Ortúzar & Elisabetta Cherchi & Luis Ignacio Rizzi, 2014. "Transport research needs," Chapters, in: Stephane Hess & Andrew Daly (ed.), Handbook of Choice Modelling, chapter 29, pages 688-698, Edward Elgar Publishing.
    20. Hongli Xu & Hai Yang & Jing Zhou & Yafeng Yin, 2017. "A Route Choice Model with Context-Dependent Value of Time," Transportation Science, INFORMS, vol. 51(2), pages 536-548, May.

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    More about this item

    Keywords

    Willingness to pay; gains and losses; freight choice; reference alternative;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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