Reference-dependent preferences on smart phones in South Korea: Focusing on attributes with heterogeneous preference direction

Consumers observe reference-dependent comparative attribute levels rather than absolute attribute levels of a product in their actual purchasing process. As the reference-dependent effect is important, many consumer preference studies in psychology and behavioral economics have perceived the reference-dependence as a general assumption. Nonetheless, few studies utilize standard economic models such as the discrete choice model, which is useful for analyzing demand forecasting in the marketing sector, and have used a reference-dependence utility function. Moreover, these studies analyze attributes only with the identical consumer preference directions, such as time and cost. Therefore, this study proposes an advanced discrete choice model that analyzes asymmetry preferences for attributes with heterogeneous preference direction as well as reference-dependence effect. It also investigates empirically the usefulness of the model on the market for smart phones. Based on this approach, we find wide disparities in consumer asymmetry preferences and loss aversion parameters in accordance to the existence of market experience and product attributes.