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Buy It Now or Later, or Not: Loss Aversion in Advance Purchasing

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  • Senran Lin

Abstract

This paper studies the advance-purchase game when a consumer has belief-based loss-averse preferences, introducing a novel perspective by incorporating reference updating. It demonstrates that loss aversion increases the consumer's willingness to pre-purchase. Moreover, the paper endogenizes the seller's price-commitment behavior in the advance-purchase problem. The analysis reveals that the seller will commit to his spot price even with no obligation to do so, a behavior previously assumed in the literature.

Suggested Citation

  • Senran Lin, 2021. "Buy It Now or Later, or Not: Loss Aversion in Advance Purchasing," Papers 2110.14929, arXiv.org, revised May 2024.
    • Handle: RePEc:arx:papers:2110.14929
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    References listed on IDEAS

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    Cited by:

    1. Young, Benjamin, 2024. "Expectations or rational expectations? A theory of systematic goal deviation," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 25-37.

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