In this paper we analyze a consumer choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. We make use of the fact that...

Consider a differentiated product market in which all consumers are fully informed about match value and price at the time they make their purchasing decision. Initially, consumers become informed about the prices of all products in the market but do not know the match values. Some consumers...

We study a differentiated product market in which an investor initially owns a controlling stake in one of two competing firms and may acquire a non-controlling or a controlling stake in a competitor, either directly using her own assets, or indirectly via the controlled firm. While industry...

Abstract: We develop a theory of imperfect competition with loss-averse consumers. All consumers are fully informed about match value and price at the time they make their purchasing decision. However, a share of consumers are initially uncertain about their tastes and form a reference point...

We address the effect of contextual consumer loss aversion on firm strategy in imperfect competition. Consumers are fully informed about match value and price at the moment of purchase. However, some consumers are initially uninformed about their tastes and form a reference point consisting of...

We consider product markets in which consumers are interested only in a specific product category and initially do not know which product category matches their tastes. Using sophisticated tracking technologies, an intermediary can make inferences about a consumer's preferred product category...

Complementing the existing literature on anchoring effects and loss aversion, we analyze how firms can influence loss–averse consumers’ willingness to pay by product information in the form of informative advertising rather than by prices. We find that consumers’ willingness to pay is...

We consider a market with two symmetric firms and two asymmetric consumer groups. Firms send advertising messages which inform consumers about the existence and the price of their product (Butters, 1977). Targeting a specific consumer is imperfect as with some probability the consumer is not...

In this paper, we match data on student performance in a multiple-choice exam with data on student risk preferences that are extracted from a classroom experiment. We find that more-loss-averse students leave more questions unanswered and perform worse in the multiple-choice exam when giving an...

Two players with preferences distorted by the focusing effect (Koszegi and Szeidl, 2013) negotiate an agreement over several issues and one transfer. We show that, as long as their preferences are differentially distorted, an issue will be inefficiently left out of the agreement or inefficiently...