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

Lorenzo Masiero, David A. Hensher

Research output: Journal article publicationJournal articleAcademic researchpeer-review

21 Citations (Scopus)

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 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.
Original languageEnglish
Pages (from-to)249-271
Number of pages23
JournalTransportation
Volume38
Issue number2
DOIs
Publication statusPublished - 1 Jan 2011
Externally publishedYes

Keywords

  • Freight choice
  • Gains and losses
  • Reference alternative
  • Willingness to pay

ASJC Scopus subject areas

  • Civil and Structural Engineering
  • Development
  • Transportation

Cite this