Journal
MANAGEMENT SCIENCE
Volume 64, Issue 1, Pages 421-436Publisher
INFORMS
DOI: 10.1287/mnsc.2016.2605
Keywords
multiattribute reference dependence; loss aversion; capacity-reference levels; empirical operations management; marketing
Funding
- Fishman-Davidson Center for Service and Operations Management
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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.
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