Loss Aversion and a Kinked Demand Curve: Evidence from Contingent Behavior Analysis of Seafood Consumers

ASU Author/Contributor (non-ASU co-authors, if there are any, appear on document)
Ashton Morgan Ph.D., Assistant Professor (Creator)
Institution
Appalachian State University (ASU )
Web Site: http://www.library.appstate.edu/

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.

Additional Information

Publication
Morgan, O. A. (2008) Loss Aversion and a Kinked Demand Curve: Evidence from Contingent Behavior Analysis of Seafood Consumers. Applied Economics Letters, 15(8): 625-628 (June 2008). Published by Taylor & Francis (ISSN: 1350-4851). DOI: 10.1080/13504850600721940
Language: English
Date: 2008