Reference-dependent preferences and loss aversion: A discrete choice experiment in the health-care sector
Journal Title: Judgment and Decision Making - Year 2008, Vol 3, Issue 2
Abstract
This study employs a Discrete Choice Experiment (DCE) in the health-care sector to test the loss aversion theory that is derived from reference-dependent preferences: The absolute subjective value of a deviation from a reference point is generally greater when the deviation represents a loss than when the same-sized change is perceived as a gain. As far as is known, this paper is the first to use a DCE to test the loss aversion theory. A DCE is a highly suitable tool for such testing because it estimates the marginal valuations of attributes, based on deviations from a reference point (a constant scenario). Moreover, loss aversion can be examined for each attribute separately. Another advantage of a DCE is that is can be applied to non-traded goods with non-tangible attributes. A health-care event is used for empirical illustration: The loss aversion theory is tested within the context of preference structures for maternity-ward attributes, estimated using data gathered from 3850 observations made by a sample of 542 women who had recently given birth. Seven hypotheses are presented and tested. Overall, significant support for behavioral loss aversion theories was found.
Authors and Affiliations
Einat Neuman and Shoshona Neuman
Keywords
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