Testing the Reference-dependent Model: An Experiment on Asymmetrically Dominated Reference Points

Standard choice theory assumes choice to be independent of the point of reference. Based on a number of studies which challenge this assumption, Tversky and Kahneman have proposed a reference-dependent model which captures the in ̄uence of reference points on individual choice. If choice is reference-dependent, switching the reference point so that it is ®rst dominated by x and then by y increases the likelihood of choosing y. Switching the location of an asymmetrically dominated reference point without altering the dominance relationship should also in ̄uence reference-dependent choice in a predicted manner. In this paper the reference-dependent model is tested in two experiments which focus on asymmetrically dominated reference points. The results of these experiments give further con®rmation to the reference-dependent model. # 1998 John Wiley & Sons, Ltd. Behav. Dec. Making, 11: 181±192, 1998.