Loss Aversion in Post-Sale Purchases of Two Close Substitutes

This paper employs micro-level data to identify consumers’ loss aversion when choosing between two products that share the same price and observable product characteristics. We focus on the post-sale observations where one product experienced a sale, but the other stayed unchanged. The paper contributes to the literature by demonstrating that a product benefits when its close competitor’s sale is over; a loss-averse consumer would switch to the close substitute even when both products share the same price