Loss Aversion in Grocery Panel Data: The Confounding E ect of Price Endogeneity∗

In marketing, there has been extensive empirical research to ascertain whether there is evidence of loss aversion as predicted by several reference price preferences theories. Most of that literature nds that there is indeed evidence of loss aversion for many di erent goods. I argue that it is possible that some of that evidence seemingly supporting loss aversion arises because price endogeneity is not properly taken into account. Using scanner data I study four product categories: bread, chicken, corn and tortilla chips, and pasta. Taking prices as exogenous, I nd evidence of loss aversion for bread and corn and tortilla chips. However, when instrumenting prices, the loss aversion evidence disappears.