Reference Escalation in Sequential Choice
51 Pages Posted: 26 Jul 2017
Date Written: July 25, 2017
Most would agree that the decision to purchase a new book should not be influenced by a previous decision over hand-soap. Most would be wrong. We show that the decision to accept an offer depends on the outcome of previous, seemingly unrelated decisions in a systematic manner, with prior acceptances increasing the likelihood of offer acceptance and previous rejections decreasing it, with rejections producing a larger effect than acceptances. We propose that even when choices are unrelated, a shared underlying dimension of value is causing previous choices to influence the current decision through a retained reference value. This new account reconciles previous conflicting theories about sequential decision making. We provide evidence to support the proposed account and to reject alternative explanations. We discuss the theoretical, methodological, and profound practical implications of our account for both policy and research design.
Keywords: Sequential Choice, Preferences, Reference Point Dynamics
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