Reference Escalation in Sequential Choice

51 Pages Posted: 26 Jul 2017

See all articles by On Amir

On Amir

University of California, San Diego (UCSD) - Rady School of Management

Coby Morvinski

Ben-Gurion University of the Negev - Guilford Glazer Faculty of Business & Managment

Date Written: July 25, 2017

Abstract

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

Suggested Citation

Amir, On and Morvinski, Coby, Reference Escalation in Sequential Choice (July 25, 2017). Available at SSRN: https://ssrn.com/abstract=3008480 or http://dx.doi.org/10.2139/ssrn.3008480

On Amir (Contact Author)

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
858-534-2023 (Phone)
858-534-0745 (Fax)

HOME PAGE: http://management.ucsd.edu/faculty/directory/amir/

Coby Morvinski

Ben-Gurion University of the Negev - Guilford Glazer Faculty of Business & Managment ( email )

P.O.B. 653
Beer-Sheva, 8410501
Israel

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