Loss Aversion in Post-Sale Purchases of Consumer Products and Their Substitutes
Debajyoti Ray, Matthew Shum, Colin F. Camerer
American Economic Review · 2015 · Volume 105 · Issue 5
Abstract
This paper considers the measurement of consumer loss aversion in product markets. We introduce a test based on a "substitution effect," focusing on how the end of a sale affects sales not of the good itself, but a substitute good. Such an effect cannot be easily confounded with consumer stockpiling. Using a unique dataset from an online hardware retailer, we find evidence consistent with consumer loss aversion. Moreover, we find that less experienced consumers suffer a more prominent loss aversion bias compared to more experienced consumers.
Keywords
Consumer Economics: Empirical Analysis, Criteria for Decision-Making under Risk and Uncertainty, Retail and Wholesale Trade, e-Commerce
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