REFERENCING, GAINS-LOSSES ASYMMETRY AND NON-LINEAR SENSITIVITIES IN COMMUTER DECISIONS: ONE SIZE DOES NOT FIT ALL!

Abstract

In contrast with expected utility theory, empirical findings indicate that decisionmakers are sensitive to departures from reference points rather than states. Several tests of the reference-dependent preference framework have been carried out in experimental economics, and to a smaller extent in a choice modelling setting, to date. However, these empirical applications have generally focussed on a single behavioural phenomenon using uniform modelling approaches. This paper aims to broaden existing work by presenting a multi-attribute framework, allowing contemporarily for gain-loss asymmetry, non-linearity and testing for several possible reference points. The framework is tested in the context of commuter choices and reveals important gains in model fit and further insights into behaviour compared to standard modelling approaches, including substantial impacts on implied welfare measures.

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