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Loss aversion and a kinked demand curve: evidence from contingent behaviour analysis of seafood consumers

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  • Ash Morgan

Abstract

Several laboratory experiments and market-based research in the fields of psychology, economics and marketing have provided increasing evidence of individuals exhibiting loss aversion tendencies, with decision-making based on a pre-existing reference point. This creates an S-shaped value function and associated kink in the demand curve. This research provides contingent behaviour analysis of 1790 seafood consumers across the Mid-Atlantic region. A survey is specifically designed to elicit respondents' change in consumption from their reference point when faced with price variations in the seafood market. Results from a Tobit model with random effects provide empirical support of consumers behaving in a manner consistent with loss aversion theory, revealing a kinked demand curve for seafood meals at the respondents' reference point.

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  • Ash Morgan, 2008. "Loss aversion and a kinked demand curve: evidence from contingent behaviour analysis of seafood consumers," Applied Economics Letters, Taylor & Francis Journals, vol. 15(8), pages 625-628.
    • Handle: RePEc:taf:apeclt:v:15:y:2008:i:8:p:625-628
    DOI: 10.1080/13504850600721940
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    1. repec:hum:wpaper:sfb649dp2014-065 is not listed on IDEAS
    2. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2017. "A theory of price adjustment under loss aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 78-95.

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