Willingness to Pay with Reference-dependent Preferences: A Comparative Analysis of Attribute-based and Alternative-based Approach

Consumer preferences are often influenced by reference-dependent preferences. This study investigates the influence of reference-dependent preferences on the estimation of willingness to pay (WTP) for table grape attributes elicited by a second-price auction. We evaluate two models: the attribute-based reference dependence model, where individuals compare the target product's attributes with their favorite ones, and the alternative-based reference dependence model, where comparisons are made with a reference product. Results show that including reference points impacts the WTP estimation for different attributes, with varying levels of loss aversion, suggesting the attribute-specific influence of reference points.