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Multiattribute Loss Aversion and Reference Dependence: Evidence from the Performing Arts Industry

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  • Necati Tereyağoğlu

    (Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia 30308)

  • Peter S. Fader

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

  • Senthil Veeraraghavan

    (The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104)

Abstract

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.

Suggested Citation

  • Necati Tereyağoğlu & Peter S. Fader & Senthil Veeraraghavan, 2018. "Multiattribute Loss Aversion and Reference Dependence: Evidence from the Performing Arts Industry," Management Science, INFORMS, vol. 64(1), pages 421-436, January.
    • Handle: RePEc:inm:ormnsc:v:64:y:2018:i:1:p:421-436
    DOI: 10.1287/mnsc.2016.2605
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