Multiattribute Loss Aversion and Reference Dependence: Evidence from the Performing Arts Industry

We study the prevalence of endogenously driven multi-attribute reference effects in a revenue management setting based on data of individual level purchases over a series of concert performances. The reference dependence that drives consumer choice is not only based on the price but also on observed sales (as a fraction of the seating capacity). We show that consumers set their own internal price and sales reference levels through observations during their past visits. We find that consumers also suffer from loss aversion on both prices and seats sold: consumers incur significant utility loss when prices are above their references or when the actual seat sales are lower than their references. We provide insights into pricing policies that can address consumer decisions driven by multi-attribute reference dependence and loss aversion. We show it may be better to discount prices for sections with high sales than sections with low sales particularly for concerts with relatively low sales. Overall event popularity dampens loss aversion on seat sales, but reference-dependent behavior persists.