Another look at loss aversion in brand choice data: Can we characterize the loss averse consumer?

Klapper, D; Ebling, C; Temme, J

Another look at loss aversion in brand choice data: Can we characterize the loss averse consumer?

Klapper, D Ebling, C

Temme, J

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Publication Type:: Journal Article
Citation:: International Journal of Research in Marketing, 2005, 22 (3), pp. 239 - 254
Issue Date:: 2005-09-01

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Field	Value	Language
dc.contributor.author	Klapper, D	en_US
dc.contributor.author	Ebling, C https://orcid.org/0000-0002-8573-6978	en_US
dc.contributor.author	Temme, J	en_US
dc.date.issued	2005-09-01	en_US
dc.identifier.citation	International Journal of Research in Marketing, 2005, 22 (3), pp. 239 - 254	en_US
dc.identifier.issn	0167-8116	en_US
dc.identifier.uri	http://hdl.handle.net/10453/10239
dc.description.abstract	Much research has focused on the effects of reference prices on brand choice decisions using scanner panel data. The theory and application are well-documented and accepted. However, researchers have found contrary results on the existence of loss aversion in consumer goods markets. Loss aversion is a phenomenon based on the reference dependent theory that consumers respond more to losses (reference price < price) than to gains (reference price > price). The mixed results on the existence of loss aversion can be a result of not adequately accounting for consumer heterogeneity in response to marketing effects. Therefore, we focus our analysis on loss aversion and adequately accounting for consumer heterogeneity. We estimate a reference dependent model with a mixed logit specification that allows for a continuous distribution of response heterogeneity in the population. We use Gibbs Sampling to obtain individual estimates. Our estimation results from two different consumer goods categories, which show that the degree of loss aversion is small after properly accounting for heterogeneity. Further, we accomplish a posterior analysis and investigate whether the individual response to gains and losses can be attributed to consumer specific characteristics. The relation of the estimated individual specific variables to households' sociodemographic and psychographic variables as well as to observed purchase behavior reveal interesting insights into which consumers respond more or less to price deviations from their reference point. Hence, our results are important for the development of effective pricing strategies and the timing of price promotions. © 2005 Elsevier B.V. All rights reserved.	en_US
dc.relation.ispartof	International Journal of Research in Marketing	en_US
dc.relation.isbasedon	10.1016/j.ijresmar.2004.09.002	en_US
dc.subject.classification	Marketing	en_US
dc.title	Another look at loss aversion in brand choice data: Can we characterize the loss averse consumer?	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	22	en_US
utslib.for	1505 Marketing	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Marketing Discipline
utslib.copyright.status	closed_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	22	en_US

Abstract:

Much research has focused on the effects of reference prices on brand choice decisions using scanner panel data. The theory and application are well-documented and accepted. However, researchers have found contrary results on the existence of loss aversion in consumer goods markets. Loss aversion is a phenomenon based on the reference dependent theory that consumers respond more to losses (reference price < price) than to gains (reference price > price). The mixed results on the existence of loss aversion can be a result of not adequately accounting for consumer heterogeneity in response to marketing effects. Therefore, we focus our analysis on loss aversion and adequately accounting for consumer heterogeneity. We estimate a reference dependent model with a mixed logit specification that allows for a continuous distribution of response heterogeneity in the population. We use Gibbs Sampling to obtain individual estimates. Our estimation results from two different consumer goods categories, which show that the degree of loss aversion is small after properly accounting for heterogeneity. Further, we accomplish a posterior analysis and investigate whether the individual response to gains and losses can be attributed to consumer specific characteristics. The relation of the estimated individual specific variables to households' sociodemographic and psychographic variables as well as to observed purchase behavior reveal interesting insights into which consumers respond more or less to price deviations from their reference point. Hence, our results are important for the development of effective pricing strategies and the timing of price promotions. © 2005 Elsevier B.V. All rights reserved.

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http://hdl.handle.net/10453/10239