Several experimental studies have reported that an otherwise robust regularity - the disparity between Willingness-To-Accept and Willingness-To-Pay - tends to be greatly reduced in repeated markets, posing a serious challenge to existing reference-dependent and referenceindependent models alike. This paper offers a new account of the evidence, based on the assumptions that individuals are affected by good and bad deals relative to the expected transaction price (price sensitivity), with bad deals having a larger impact on their utility ('baddeal' aversion). These features of preferences explain the existing evidence better thanalternative approaches, including the most recent developments of loss aversion models.
|Number of pages||21|
|Publication status||Published - 2009|
|Name||Working Paper - Centre for Social and Economic Research on the Global Environment|
|Publisher||Centre for Soc. Econ. Res. on the Global Environment|