TESTING THE REFERENCE-DEPENDENT MODEL - AN EXPERIMENT ON ASYMMETRICALLY DOMINATED REFERENCE POINTS

Standard choice theory assumes choice to be independent of the point o f reference. Based on a number of studies which challenge this assumpt ion, Tversky and Kahneman have proposed a reference-dependent model wh ich captures the influence of reference points on individual choice. I f choice is reference-dependent, switching the reference point so that it is first dominated by x and then by y increases the likelihood of choosing y. Switching the location of an asymmetrically dominated refe rence point without altering the dominance relationship should also in fluence reference-dependent choice in a predicted manner. In this pape r the reference-dependent model is tested in two experiments which foc us on asymmetrically dominated reference points. The results of these experiments give further confirmation to the reference-dependent model . (C) 1998 John Wiley & Sons, Ltd.