Thesis (Ph. D.)--Ohio State University, 2006. / Title from first page of PDF file. Includes bibliographical references (p. 126-136).

In this dissertation, I examine two research questions. In chapters 2 and 3, based on idea of reference value that was first proposed by Kahneman and Tversky, I look at a potential house seller’s pricing strategy when the reference value plays a role. In chapter 2, I focus on the reference-dependence and its implications on loss aversion behavior, and I compare model predictions with documented empirical findings in the literature. In particular, I show that the stylized empirical evidence in the literature has relatively limited power on testing loss aversion, and I provide new specifications that aim to correctly test the loss aversion effect. In chapter 3, I examine a reference-dependent seller’s pricing strategy in a less heterogeneous housing market such as the multi-unit residential market. Acknowledging the fact that units in the same building serve as close substitutes for each other, I show that the recent transaction price on a unit in the same building may generate two signaling effects. First, the average willingness to pay among buyers is positively correlated with the observed price, which generates a spatio-temporal autocorrelation effect; second, after observing the prior price, the heterogeneity of the potential buyer’s willingness to pay decreases, inducing house sellers to mark down their asking prices. In chapter 4, I examine the power of monitoring and forcing contract on improving the managerial efficiency of REITs. I put particular emphasis on its implications regarding the choice of advisor type in REITs. I show that, for both internal and external advisors, increasing levels of monitoring power will increase their equilibrium effort under a stochastic forcing contract. Furthermore, I show that a crucial driving force regarding advisor choice is the heterogeneity of monitoring power between internal and external advisors and across REIT firms. Provided that the gap of monitoring power is large enough between internal and external advisors, shareholders could make use of the heterogeneity, and induce higher effort from external advisors. Hence, I am able to provide a theoretical justification regarding the potential appeal of an external managerial structure, which is usually regarded as being inferior to an internal managerial structure.

In this dissertation, I examine two research questions. In chapters 2 and 3, based on idea of reference value that was first proposed by Kahneman and Tversky, I look at a potential house seller’s pricing strategy when the reference value plays a role. In chapter 2, I focus on the reference-dependence and its implications on loss aversion behavior, and I compare model predictions with documented empirical findings in the literature. In particular, I show that the stylized empirical evidence in the literature has relatively limited power on testing loss aversion, and I provide new specifications that aim to correctly test the loss aversion effect. In chapter 3, I examine a reference-dependent seller’s pricing strategy in a less heterogeneous housing market such as the multi-unit residential market. Acknowledging the fact that units in the same building serve as close substitutes for each other, I show that the recent transaction price on a unit in the same building may generate two signaling effects. First, the average willingness to pay among buyers is positively correlated with the observed price, which generates a spatio-temporal autocorrelation effect; second, after observing the prior price, the heterogeneity of the potential buyer’s willingness to pay decreases, inducing house sellers to mark down their asking prices. In chapter 4, I examine the power of monitoring and forcing contract on improving the managerial efficiency of REITs. I put particular emphasis on its implications regarding the choice of advisor type in REITs. I show that, for both internal and external advisors, increasing levels of monitoring power will increase their equilibrium effort under a stochastic forcing contract. Furthermore, I show that a crucial driving force regarding advisor choice is the heterogeneity of monitoring power between internal and external advisors and across REIT firms. Provided that the gap of monitoring power is large enough between internal and external advisors, shareholders could make use of the heterogeneity, and induce higher effort from external advisors. Hence, I am able to provide a theoretical justification regarding the potential appeal of an external managerial structure, which is usually regarded as being inferior to an internal managerial structure.

In this dissertation, I examine two research questions. In chapters 2 and 3, based on idea of reference value that was first proposed by Kahneman and Tversky, I look at a potential house seller’s pricing strategy when the reference value plays a role. In chapter 2, I focus on the reference-dependence and its implications on loss aversion behavior, and I compare model predictions with documented empirical findings in the literature. In particular, I show that the stylized empirical evidence in the literature has relatively limited power on testing loss aversion, and I provide new specifications that aim to correctly test the loss aversion effect. In chapter 3, I examine a reference-dependent seller’s pricing strategy in a less heterogeneous housing market such as the multi-unit residential market. Acknowledging the fact that units in the same building serve as close substitutes for each other, I show that the recent transaction price on a unit in the same building may generate two signaling effects. First, the average willingness to pay among buyers is positively correlated with the observed price, which generates a spatio-temporal autocorrelation effect; second, after observing the prior price, the heterogeneity of the potential buyer’s willingness to pay decreases, inducing house sellers to mark down their asking prices. In chapter 4, I examine the power of monitoring and forcing contract on improving the managerial efficiency of REITs. I put particular emphasis on its implications regarding the choice of advisor type in REITs. I show that, for both internal and external advisors, increasing levels of monitoring power will increase their equilibrium effort under a stochastic forcing contract. Furthermore, I show that a crucial driving force regarding advisor choice is the heterogeneity of monitoring power between internal and external advisors and across REIT firms. Provided that the gap of monitoring power is large enough between internal and external advisors, shareholders could make use of the heterogeneity, and induce higher effort from external advisors. Hence, I am able to provide a theoretical justification regarding the potential appeal of an external managerial structure, which is usually regarded as being inferior to an internal managerial structure. / Business, Sauder School of / Graduate

Thesis (Ph. D.)--University of Texas at Austin, 2007. / Vita. Includes bibliographical references.

This thesis studies loss aversion and reference-dependent preferences. The second chapter and the fourth chapter analyze the price strategy for the monopolist with a loss-averse consumer following the reference-dependent model of Kőszegi and Rabin (2006). The second chapter takes into account the happiness of not paying at the highest price and the disappointment of not paying at the lowest price and finds that this happiness has a positive effect on the monopolist's revenue and this disappointment has a negative effect on the monopolist's revenue. The fourth chapter proposes a two-period pricing model and shows that the monopolist could make use of two-price strategy to earn a revenue that is greater than the product value. The revenue of the two-period model is higher than one-period model when the weight of gain-loss utility is big enough. The third chapter studies the winner's regret with bidders when they have reference-dependent preferences in the sealed-bid first-price auction, second-price auction and all-pay auction and shows that the optimal bid is smaller with regret than without regret for loss-averse bidders, is greater for gain-seeking bidders and is the same for risk-neutral bidders.

The purpose of this study was to determine the effects of whether pounds are being lost or gained on the rate at which people discount the value of weight change outcomes, as well as determine the effects of whether pounds are being lost or gained and diet length on the value of access to higher calorie foods relative to weight change outcomes. This was accomplished by repeatedly asking participants to choose between two dietary options of the same length but which resulted in gaining or losing a certain number of pounds. Each question varied the length of the diet, how many pounds could be gained or lost, and whether those pounds were being gained when they chose the higher calorie diet or lost when they chose the lower calorie diet. The survey was administered with 30 participants. Whether pounds per being gained or lost did not have a significant effect on the rate at which weight change outcomes were discounted (t = 1.883, p = .07), but did have a significant effect on how many pounds needed to be at stake per day in order for the participant to choose the lower calorie diet (t = 4.995, p < .01). There was also a significant correlation between diet length and how many pounds needed to be at stake per day in order for the participant to choose the lower calorie diet (ρ = -.373, p <.01). The current investigation has implications for our understanding of choice and discounting behavior, and has specific implications for people who wish to make healthier dietary decisions.

Kahneman and Tversky (1979) first demonstrated that when individuals decide whether or not to accept a gamble, potential losses receive more weight than possible gains in the decision. This phenomenon is referred to as loss aversion. We investigated how loss aversion in risky financial decisions is influenced by sudden changes to wealth, employing both behavioral and neurobiological measures. We implemented an fMRI experimental paradigm, based on that employed by Tom et al. (2007). There are two treatments, called RANDOM and CONTINGENT. In RANDOM, the baseline setting, the changes to wealth, referred to as wealth shocks in economics, are independent of the actual choices participants make. Under CONTINGENT, we induce the belief that the changes in income are a consequence of subjects' own decisions. The magnitudes and sequence of the shocks to wealth are identical between the CONTINGENT and RANDOM treatments. We investigated whether more loss aversion existed in one treatment than another. The behavioral results showed significantly greater loss aversion in CONTINGENT compared to RANDOM after a negative wealth shock. No differences were observed in the response to positive shocks. The fMRI results revealed a neural loss aversion network, comprising the bilateral striatum, amygdala and dorsal anterior cingulate cortex that was common to the CONTINGENT and RANDOM tasks. However, the ventral prefrontal cortex, primary somatosensory cortex and superior occipital cortex, showed greater activation in response to a negative change in wealth due to individual's own decisions than when the change was exogenous. These results indicate that striatum activation correlates with loss aversion independently of the source of the shock, and that the ventral prefrontal cortex (vPFC) codes the experimental manipulation of agency in one's actions influencing loss aversion.

Mental accounting is a technique for asserting self-control in the face of consumption decisions, functioning as a categorization system for income and expenses. A body of evidence supports the concept that consumers are driven by perception and emotion, not rational economic thought. Mental accounting is subject to the effects of cognitive biases, leading to imperfect financial behavior. In the following paper, I present a proposal for three consecutive experiments designed to investigate the influence that advanced planning (the formation of mental budgets) and unexpected financial shocks (windfalls) can have on our use of mental accounting to regulate spending. The dependent variable is a dollar measure of how much consumers indicated they are “willing to pay” (WTP) to hypothetically purchase a typical good. The experiments share an intertemporal manipulation of a monthly budget creation task. Experiment one investigates the combined effects of positive and negative windfalls and budget creation on WTP. Experiment 2 explores boundary conditions of timing on loss aversion by manipulating the length of the time period that separates a negative windfall from the WTP task. Experiment 3 focuses on one time period, manipulating wording of a negative financial shock to focus on framing effects. The three experiments, if carried out, should reveal significant effects on WTP, suggesting that manipulations of framing and timing can lead to inconsistent spending behaviors even in the presence of a self-control tool (the mental budget).

ABSTRACT Title:                         Lucrative deals How service offers and its clients is forms by Optional Framing                 Level:                       Bachelor, Business Administration Author:                     Gabriel Krogius, Mikaela Sörensen Supervisor:              Jonas Kågström, department of economics Date:                         2013, August Introduction:           That the human mind may be directed by how an offer is designed is not news. However, what is new in the following thesis is whether a person is affected in the case of a service rather than, as previously research, a physical product. Does a person find it harder to separate with something rather than to add an option? Aim:                          The aim for this thesis is to examine how Optional Framing has affection on service offerings/companies, and in this case on real estate brokerage services. Is it, as earlier, when the human can form her own offer, the final price ends up higher when she is about to add options than removing them? Method:                    The thesis emanates to achieve earlier results where the difference in this case is that our thesis is targeting service offerings. It applies through a positivistic deductive method. The empirical data is collected from a quantitative sample of survey answers, where one part of the groups is faced to remove options from a deluxe-offer and the other part of the group is about to add options to a standard-offer. The survey was created with episodic support from a sample of interviews with active real estate agents. Discussion:               The thesis shows that earlier results approve within service companies and its offers, in this case real estate brokerage. We can interpret that the human mind is directed through Optional Framing and that the deluxe-offer ends with a higher price and more options to it than the standard-offer. The correlation analysis shows us connection between some of the offers services that can benefit real estate brokerage in the future. Future research:     We hope that foundations have been created for future research that can lead on to further understanding about the customers view on real estate brokerage services and how to make them more attractive. Contribution:           Real estate brokerage can benefit from the results in this thesis where they further can implement the work from comparison of theory and empirical.  Key words:              Loss Aversion, The Endowment Effect, Status Quo Bias and also Framing/Optional Framing.